REG - Renold PLC - Results for the year ended 31 March 2024
17/07/2024 07:00
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RNS Number : 6641W Renold PLC 17 July 2024
Renold plc
Final results for the year ended 31 March 2024
("Renold", the "Company" or, together with its subsidiaries, the "Group")
Record trading performance, significant earnings growth and strong cash
generation, dividend resumed
Renold (AIM: RNO), a leading international supplier of industrial chains and
related power transmission products, is pleased to announce its audited
results for the year ended 31 March 2024 ("FY24").
Financial highlights
£m 2024 2023 Change Change (constant currency)(1)
Revenue 241.4 247.1 -2.3% +0.9%
Adjusted operating profit(2) 29.7 24.2 +22.7% +27.3%
Return on sales(2) 12.3% 9.8% +250bps +260bps
Adjusted profit before tax(2) 22.1 18.6 +18.8%
Net debt(3) 24.9 29.8
Adjusted earnings per share(2) 7.8p 6.5p +20.0%
Ordinary dividend per share 0.5p -
Additional statutory measures
Operating profit 30.5 22.9 +33.2%
Profit before tax 22.9 17.3 +32.4%
Basic earnings per share 8.3p 5.7p +45.6%
• Revenue of £241.4m, 2.3% lower year on year due to currency headwinds, (up
0.9% at constant exchange rates) (FY23: £247.1m)
• Adjusted operating profit of £29.7m (FY23: £24.2m), up 22.7% as a result of
significantly increased margins with return on sales of 12.3%, up 250bps
• Reported operating profit up 33.2% to £30.5m (FY23: £22.9m)
• Net debt as at 31 March 2024 of £24.9m, a reduction of £4.9m, after
acquisition payments of £5.2m, EBT purchases of £4.5m and deferred capital
expenditure of £2.2m
• Year end net debt of 0.6x adjusted EBITDA (31 March 2023: 0.8x)
• Adjusted EPS up 20.0% to 7.8p (FY23: 6.5p); Basic EPS 8.3p (FY23: 5.7p)
• Resumption of dividends, with a full year dividend proposed of 0.5p per share;
the first dividend announced since 2005
Business highlights
• The Group delivered record results, with both Chain and TT divisions
performing strongly, notwithstanding the difficult inflationary, trading and
macroeconomic backdrop
• Order intake of £227.5m (FY23: £257.5m), impacted by a shortening in
duration of the order book in H1, reflecting improved supply chain conditions.
H2 order intake up 7.5% over H1 (8.4% at constant exchange rates)
• Closing order book consistent with the half year position at £83.6m
• Acquisition of Davidson Chain in September 2023, for AU$6.0m, increases the
Group's access to the Australian conveyor and adapted transmission chain
markets. The integration process is progressing to plan
• Increased capital investment during the year has improved the efficiency,
productivity and capability of manufacturing locations, reflected in the
strong market progression
(1) See below for reconciliation of actual rate, constant exchange rate and
adjusted figures
(2) See Note 19 for definitions of adjusted measures and the differences to
statutory measures
(3) See Note 17 for a reconciliation of net debt which excludes lease
liabilities
Robert Purcell, Chief Executive, commented:
"I am pleased that the Group continued to perform strongly throughout the year
reflecting the hard work, strategically, commercially and operationally that
has been undertaken over recent years by our employees across the world. The
business is now at an inflection point where we are starting to see the
compounding impact of the many recent exciting initiatives as they come to
fruition. We have a very clear strategy and are executing it diligently. Our
continuous improvement initiatives are building an increasingly efficient,
productive and resilient business and are providing an ever improving platform
to support our commercial initiatives."
Meeting for analysts and institutional investors
A virtual meeting for institutional investors and analysts will be held today
at 9.30am BST. If you wish to attend this meeting please contact
renold@investor-focus.co.uk or call Tim Metcalfe of IFC Advisory Limited (020
3934 6632) before 8.45am to be provided with access details.
Retail investor presentation and Q&A session
Renold management will be hosting an online presentation and Q&A session
at 5.30pm BST today, 17 July 2024. This session is open to all existing and
prospective shareholders. Those who wish to attend should register via the
following link and they will be provided with access details:
https://us02web.zoom.us/webinar/register/WN_9KfZYYnqRS6RgoVKiXvybQ
(https://us02web.zoom.us/webinar/register/WN_9KfZYYnqRS6RgoVKiXvybQ)
Participants will have the opportunity to submit questions during the session,
but questions are welcomed in advance and may be submitted to:
renold@investor-focus.co.uk.
Reconciliation of reported and adjusted results
Revenue Operating profit Earnings per share
2024 2023 2024 2023 2024 2023
£m £m £m £m pence pence
Statutory reported 241.4 247.1 30.5 22.9 8.3 5.7
Amortisation of acquired intangible assets - - 1.0 0.7 0.5 0.3
Acquisition costs - - 0.5 0.6 0.2 0.3
- Deferred tax triggered on acquisition - - - - (0.5) -
Assignment of lease and cost of closed sites - - (2.3) - (1.1) -
- Tax on assignment of lease and cost of closed sites - - - - 0.4 -
Tax adjustments relating to prior year - - - - - 0.2
Adjusted 241.4 247.1 29.7 24.2 7.8 6.5
Exchange impact 7.9 - 1.1 - 0.1 -
Adjusted at constant exchange rates 249.3 247.1 30.8 24.2 7.9 6.5
ENQUIRIES:
Renold plc IFC Advisory Limited
Robert Purcell, Chief Executive Tim Metcalfe
Jim Haughey, Group Finance Director Graham Herring
renold@investor-focus.co.uk
0161 498 4500 020 3934 6630
Nominated Adviser and Joint Broker Joint Broker
Peel Hunt LLP Cavendish Capital Markets Limited
Mike Bell Ed Frisby (Corporate Finance)
Ed Allsopp Andrew Burdis / Harriet Ward (ECM)
020 7418 8900 020 7220 0500
Cautionary statement regarding forward-looking statements
Some of the information in this document may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Renold plc and its subsidiaries (the Group). You can identify
forward-looking statements by terms such as "expect", "believe", "anticipate",
"estimate", "intend", "will", "could", "may" or "might", the negative of such
terms or other similar expressions. Renold plc (the Company) wishes to caution
you that these statements are only predictions and that actual events or
results may differ materially. The Company does not intend to update these
statements to reflect events and circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events. Many factors could cause
the actual results to differ materially from those contained in projections or
forward-looking statements of the Group, including, among others, general
economic conditions, the competitive environment as well as many other risks
specifically related to the Group and its operations. Past performance of the
Group cannot be relied on as a guide to future performance.
NOTES FOR EDITORS
Renold is a global leader in the manufacture of industrial chains and also
manufactures a range of torque transmission products which are sold throughout
the world to a broad range of original equipment manufacturers and
distributors. The Company has a reputation for quality that is recognised
worldwide. Its products are used in a wide variety of industries including
manufacturing, transportation, energy, metals and mining.
Further information about Renold can be found on our website at:
www.renold.com (http://www.renold.com)
Chair's statement
I am pleased to report that FY24 was another excellent year for Renold in
which we delivered further improvements over what was a record financial
performance in the prior financial year, while completing a bolt-on
acquisition in Australia, which strengthens our position in that market.
I also continue to be impressed by the engagement, flexibility and
adaptability of our teams across the world, who have delivered an outstanding
result despite the various geopolitical challenges and the effects of cost
inflation.
Strategic developments
During the year, the Renold strategic change programmes across the Group once
again delivered meaningful benefits, particularly in standardising and
simplifying the business.
The completion of several major strategic restructuring initiatives in prior
years, together with the reducing debt levels and strong balance sheet puts
the Group in a strong position to capitalise on accretive acquisitions that
augment our existing market position. This will allow us to accelerate growth
in revenue, including for our existing products, in adjacent sectors and by
entry into under-represented applications and geographies. Most importantly,
the Group will also benefit from significant production synergies by
integrating acquired businesses.
The continuing review of our capabilities throughout the Group is identifying
opportunities for the upgrade and development of existing manufacturing
processes across our international locations to create higher specification,
higher performance products. This review will also facilitate standardisation
across more product lines which, in turn, will enable us to benefit more
comprehensively from our geographic footprint and economies of scale. In
addition, flexibility between manufacturing locations will support increasing
customer expectations for supply chain diversification, for risk mitigation
and a changing tariff environment, improving even further our value
proposition.
Sustainability
During the year, the Group continued to develop a strategy for long-term
sustainability, including reduced energy consumption, raw material waste,
packaging use and carbon dioxide emissions, whereby Renold is ensuring
sustainability is one of its guiding principles. Renold is focussed on making
a difference through real actions which, over a period of time, will deliver
discernible benefits for the environment, our customers and the business. Our
leader for sustainability is helping the Board to develop policies and
strategies in this area. This year the new climate-related disclosure
requirements under the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022 were considered and applied by the Group, and the
new disclosures are built into the appropriate sections of the Annual Report.
Dividend
The Board fully recognises the importance of dividends as part of the overall
value creation proposition for shareholders. The Board has carefully reviewed
its capital allocation priorities, and believes that significant organic and
inorganic investment opportunities remain available to the Group. We are also
aware of the continued and sustainable progress in terms of profitability, and
free cash flow generation that the Group has made over recent years, and we
now believe that the Group can both capitalise on these investment
opportunities, whilst also reintroducing dividend payments to shareholders.
Accordingly, the Board is recommending the payment of a dividend on the
ordinary shares of the Company for the year ended 31 March 2024 of 0.5p per
ordinary share. The dividend, if approved by shareholders at the 2024 Annual
General Meeting, will be paid on 17 September 2024 to shareholders on the
register as at 9 August 2024. The shares will be marked ex-dividend on 8
August 2024.
Summary
The Group has performed admirably in the face of continued supply chain and
inflationary pressures. However, the strong and improving trading and
financial performance of the Group, particularly increased cash flow
generation, is providing greater flexibility to exploit future organic and
acquisition-related growth opportunities, while re-introducing the payment of
a dividend to shareholders. I would like to thank all our employees around the
world for their diligence and commitment, which have been key to delivering
the strong results for the Group.
DAVID LANDLESS
CHAIR
17 July 2024
Chief Executive's review
This year saw a continuation of the Group's strong momentum and the Group's
FY24 adjusted operating profit of £29.7m is some 22.7% higher than the
previous record adjusted operating profit in the prior year.
Revenue for the year was £241.4m, a year on year increase of 0.9% at constant
exchange rates, or a 2.3% reduction when currency headwinds are taken into
account.
Group order intake during the year was £227.5m (FY23: £257.5m), a reduction
of 11.7% on a reported basis and 8.8% at constant exchange rates over the
prior year. Excluding the impact of the large military contract of £8.9m for
the Australian Navy recorded in FY23, the underlying reduction in order intake
was 5.6%, as the order book shortened following normalisation of supply chains
in the first half of the year.
Encouragingly, order intake in the second half increased over the first half
by 7.5%, or 8.4% at constant exchange rates. The closing order book at 31
March 2024 of £83.6m remains close to record levels and was unchanged from
the half year position (30 September 2023: £83.6m).
Group adjusted operating profit(1) of £29.7m (FY23: £24.2m) was 22.7% ahead
of prior year on a reported basis, and 27.3% ahead on a constant exchange
rates basis. Profitability was strong in the second half of the financial
year, where the Group reported a return on sales margin of 12.6%. Statutory
operating profit increased to £30.5m (FY23: £22.9m).
The Group continued to benefit from the impact of the significant efforts
undertaken in the year, and previous years, to lower the fixed cost base
whilst increasing flexibility and operational leverage. The Group has
successfully managed a period of significant supply chain disruption to
materials and transportation, in terms of availability, lead times and
increased input costs. Cost increases have been successfully passed through
whilst simultaneously running cost reduction, simplification and
standardisation programmes. We expect cost pressure on material, labour,
energy and transportation to persist in the current financial year.
Renold continues to drive increased operational performance through specific
projects aimed at better levels of efficiency and productivity, through
automation, improved design, standardisation of products, better utilisation
of machinery and people, including more flexible working practices, and
leveraging the benefits of improved procurement strategies. The Group's
capital investments returned to more normal levels following a period of lower
spend in the prior year as a result of the supply chain disruption, and have
concentrated on increased automation within all of our facilities. The Group's
operational capabilities are steadily improving as consistent levels of
investment bear fruit and we continue to develop ever better technologies and
processes, allowing us to make higher specification and better performing
products that maintain and enhance our market leadership.
In September 2023, the Group acquired Davidson Chain for AU$6m, which
increases the Group's access to the Australian CVC market, building on
Renold's existing strong market position. The business is performing in line
with the Board's expectations at the time of the acquisition, and the
integration of the business into the wider Australian business is progressing
well.
A strong focus on free cash flow generation remains a key priority for
management. Closing net debt was £24.9m (31 March 2023: £29.8m), a £4.9m
reduction in the year, even after making payments related to current and prior
year acquisitions of £5.2m, deferred payments on the Chinese factory building
of £2.2m and the purchase of £4.5m of Renold shares by the Employee Benefit
Trust ("EBT").
(1) See Note 19 for definitions of adjusted measures and the differences to
statutory measures
Chain performance review
The high levels of activity seen within the Chain division in the prior year
continued. Turnover on a constant exchange rates basis reduced by 1.6%, 4.7%
when currency headwinds are taken into account, and finished the year at
£192.8m. In September 2023 the Group acquired the trading assets of Davidson
Chain in Australia, and during the period of ownership the unit contributed
turnover of £0.9m, in line with expectations. Progress continues to be made
with the Group's productivity and efficiency programmes, which are driving
sustainable margin and profit improvement. Adjusted operating profit increased
by 15.8%, 19.1% at constant exchange rates to £32.4m. Return on sales
improved by 290 basis points, to 16.3% (FY23: 13.4%) at constant exchange
rates. Statutory operating profit was £32.8m (FY23: £26.5m), £6.3m higher
than the prior year level.
2024 2023
£m £m
External revenue 191.9 201.5
Inter-segment revenue 0.9 0.9
Total revenue 192.8 202.4
Foreign exchange 6.3 -
Revenue at constant exchange rates 199.1 202.4
Operating profit 32.8 26.5
Assignment of lease and costs relating to closed sites (2.3) -
Amortisation of acquired intangibles 1.0 0.7
Adjusted operating profit 31.5 27.2
Foreign exchange 0.9 -
Adjusted operating profit at constant exchange rates 32.4 27.2
Order intake in the Chain division reduced by 13.1% year on year, or 10.4% at
constant exchange rates, as extremely high order intake seen in the prior year
reduced to more normal levels, driven by a shortening in order books following
normalisation of international supply chains. Activity in both the US (-18.4%)
and China (-41.9%) showing the main impacts.
Pleasingly, external order intake in Europe (+10.9%) and India (+37.9%)
increased over the levels seen in the first half year, although the Indian
increase was off a low base. External order intake in Australasia was broadly
flat year on year. Closing order books for the division finished the year at
£47.0m (FY23: £60.6m).
Chain Europe, which is our largest Chain business, continued the strong sales
performance experienced in the prior year. In FY23 sales revenues had
increased year on year by 25%, in FY24 revenue on a constant exchange rates
basis reduced by 1.4%, a creditable performance given the normalisation of
order intake, the general slowdown in the wider European economy and the
unwinding of various sales surcharges. Operating profit in the region
increased year on year by 7.7% at constant exchange rates, as the business
concentrated on gaining production efficiencies, through both increased
automation, and the use of our global manufacturing footprint to better
advantage.
The integration of the YUK acquisition is progressing well, underlying
revenues for the unit increased by £5.5m or 51.4% using constant exchange
rates, as the Group saw the benefit of owning the business for a full 12 month
period. Incremental operating profits to the Group derived from the insourcing
of production and cross selling opportunities for both Conveyor Chain ("CVC")
sales by our wider European sales network and our traditional Transmission
Chain ("TRC") sales within the Iberian market, which are ahead of
expectations.
Renold's new Service Centre in Turkey opened its doors during the period. The
location of the business close to Istanbul should, when coupled with the YUK
location within Spain, allow reduced delivery times and increased customer
service, and hence encourage sales throughout southern Europe.
In the Americas, activity remained at the record high levels seen last
financial year. Turnover at £85.7m was marginally ahead of the levels in
FY23, on a constant exchange rate basis, while external order intake at
£75.3m was the second largest order intake on record (at constant exchange
rates), only surpassed by the FY23 figure of £92.3m.
Improved production technology, which together with a positive mix towards own
manufactured engineering chain, especially for the marine, food machinery,
theme parks, utilities and industrial warehouse sectors, saw operating profits
at constant exchange rates increase, for the second year running, to a new
record high, an increase year on year of 20.2%, which improved return on sales
by 300 bps.
Sales to OEM customers grew steadily, especially in the escalator and forklift
truck market, while increased sales of transmission chain products sold
through distributors progressively increased. New business opportunities,
especially in the ethanol, grain handling and forestry markets, were enhanced
by the introduction of new products. Production capabilities were continually
enhanced with further investment in automated equipment and development
projects, and a large infrastructure project is being undertaken to see that
the Morristown facility is positioned to take advantage of future growth
opportunities.
In Australasia we continued to deliver revenue growth with turnover on a
constant exchange rates basis increasing year on year by 12.6%. In September
2023, the Group acquired the trading assets of Davidson Chain, and excluding
the impact of the acquisition underlying revenues increased by 7.1% using
constant exchange rates. The Davidson acquisition increases the Group's access
to the Australian CVC market, building on Renold's existing strong market
position. Davidson was the only other domestic Australian chain manufacturer,
who like Renold specialise in providing a quick turn-around high quality
service offering to customers. Following integration of the business within
the Renold facility, it is envisaged that this service philosophy will help to
grow Renold's Australian sales more widely.
Within Australia, the underlying business had a good year with external
turnover increasing by 2.7% using constant exchange rates, with continued
improvement seen in a number of sectors including mining and sugar. The recent
trend of customers increasingly buying more domestically produced goods
appears to be continuing, despite the impact of supply chain disruption to
imported products reducing in the year. Customers are increasingly seeing the
benefits of our product-enhancing engineering capabilities that deliver real
value through better performance and longer chain life. We continue to invest
in the production capabilities of our Melbourne factory, with the recent
purchase of further automated equipment. Sales in New Zealand were stable
during the year, while Malaysia and Indonesia saw growth in revenue, using
constant exchange rates, of 15.7% and 5.6% respectively. Thailand recovered
from the reduced turnover seen in the prior financial year, recording revenue
growth of 66.4% (using constant exchange rates), albeit from a low base. We
remain focussed on expanding our sales into more industries and geographies in
South East Asia, with this year recording the Group's first sales within the
Vietnamese market.
Revenues in India, using constant exchange rates, reduced by 18.9% during the
year. Increased domestic and Chinese competition, encouraged by the slow
Chinese market, led to lower levels of demand, while some of the reduction in
sales is attributed to a two week closure of the main production site for the
introduction of a new fully integrated ERP system. The unit is well placed to
benefit from the increased visibility and efficiency that the new ERP system
will bring, and it is anticipated that both sales and profitability will
recover strongly within the new financial year. The first in a series of
regional warehouses, in Nagpur, which offers our customers and distributors
much better and quicker supply should also increase sales activity. Plans are
in place for a further three regional distribution centres to help provide
significantly improved delivery times to all parts of India over the coming
years. Investment plans for the Indian factory include the introduction of the
same state-of-the-art technology used elsewhere in the Group for the
manufacture of many component types and assembly. This will allow India to
better support external customers with higher quality products and Group
customers with premium quality components.
Revenues in China reduced by 9.2% during the year at constant exchange rates,
driven by a reduction in both domestic Chinese demand and a slowdown in demand
from Group customers, especially from Europe. The initial impact was
experienced in the latter half of FY23, where intra-group order patterns were
adjusted to take into account the improving delivery times to Western markets.
This trend continued into the new financial year, with the ongoing softness in
the Group's European markets. Chinese factory demand is expected to improve in
FY25 as European demand stabilises and Chinese domestic economic activity
recovers.
Projects and investments focussed on improving the quality and specification
of products manufactured in China bore fruit during the year, allowing the
Jintan site to manufacture several mid-tier Renold standard products and
components for international markets.
During the year, our Chinese team commissioned increasing amounts of
state-of-the-art extrusion technology, while making significant investment in
automated assembly lines to facilitate high volume sales growth in both
domestic and overseas markets.
The Chain division continues to develop and evolve through investment in
equipment, processes, training and development of our people, engineering and
sales, and this provides us with an excellent base from which to build
benefits derived from the many opportunities that are available in this
market.
Torque Transmission performance review
Divisional revenues of £53.5m were £4.7m or 9.6% higher than in the prior
year due to the continued recovery in demand in our North American markets.
Our North American manufacturing and distribution business, based in Westfield
NY, saw turnover grow by 12.9% year on year using constant exchange rates. In
FY23, the Group announced it had secured an £8.9m long-term agreement to
supply large Hi-Tec couplings for the initial phase of a military contract for
the Royal Australian Navy, this agreement followed a similar military contract
to supply the second phase of a contract for the Royal Navy in FY22. Both
these contracts were progressed during the year, and contributed to a 27.0%
increase in the Renold Couplings business, using constant exchange rates. In
May 2024, the Group announced a further military contract for £10.3m for the
Royal Canadian Navy.
Divisional adjusted operating profit increased by 55.6% to £8.4m in the year
due to the effects of operational gearing, increased profit recognition on the
long term military contracts as the work progresses, and the benefits of
increased automation and operational efficiency. Return on sales for the
division was 15.7% (FY23: 11.1%), an increase of 460bps during the year. On a
constant exchange rates basis adjusted operating profit increased by 61.1%.
Momentum in this division, which has a later trading cycle and generally
larger orders than our Chain business, continues to be positive and improving.
2024 2023
£m £m
External revenue 49.5 45.6
Inter-segment revenue 4.0 3.2
Total revenue 53.5 48.8
Foreign exchange 1.7 -
Revenue at constant exchange rates 55.2 48.8
Operating profit (and adjusted operating profit) 8.4 5.4
Foreign exchange 0.3 -
Adjusted operating profit at constant exchange rates 8.7 5.4
Order intake for the year reduced by 10.4% to £47.7m (FY23: £53.3m), a
reduction of 7.4% at constant exchange rates. Excluding the impact of the
£8.9m long-term military contract announced in FY23, underlying order intake
increased by 7.5% or 11.1% at constant exchange rates.
The North American business unit benefitted from a significant increase in
demand for gears and couplings supplied intra-group from the UK, but also
experienced a significant uptick in demand for own manufactured gear spindles
and shakers, both in the US domestic market and internationally. Demand for
gear couplings to the US mass transit market also strengthened significantly.
Operating profits recorded within the US TT business increased by 83% year on
year.
Demand for Group-supplied products through the Australian distribution and
service centre was broadly flat year on year, while sales within the Chinese
market reduced by 21.4% following both a broad reduction in demand resulting
from a slowdown in the Chinese market, and a selective withdrawal from various
lower margin product segments.
The Couplings business unit delivered a 27.0% increase in turnover year on
year at constant exchange rates. As expected, revenue in the marine business,
which manages the long-term military contracts, increased year on year, as
work continued on the second phase of the UK military contract, and commenced
on the initial phase of the Australian military contract. Sales in the
industrial market also increased markedly, improving by 20.9% using constant
exchange rates, while sales in the Spanish market increased year on year by
106.8% using constant exchange rates.
Product development in the Couplings business continued with new designs for
couplings that expand the performance envelope of current products whilst
adding new features and benefits, while sales of the RBI rubber in compression
product continued apace.
The Gears business made good progress in order intake, turnover and margins
despite facing significant inflationary pressures, with turnover increasing by
10.6% during the year. Notable product developments include new products aimed
at the escalator market, especially relating to metro systems, and a number of
specialist niche products aimed at the water treatment market. Demand from OEM
customers, particularly for larger projects in the US and UK which are our key
geographic markets, remained strong during the year.
Sustainability
Renold takes a pragmatic approach to sustainability. Our focus is on making an
actual difference through continual work programmes reducing both energy
consumption and environmental impact, involving customers, our local
communities, workforce and stakeholders. We have not, and do not plan to make
far reaching statements on future carbon neutrality but instead are working to
be better each year. Alongside our own direct work on sustainability, we are
already manufacturing products that will assist our customers to improve their
own sustainability performance. Development programmes have started improving
our products even further so that customers have even more opportunities to
reduce their environmental impact.
The Group Sustainability Committee has driven a number of projects throughout
the year and is constantly assessing and promoting new opportunities. One
particular project aimed at producing new standard transmission chain
packaging designs, which are made from recycled material and are themselves
fully recyclable, is coming to fruition. All adhesives, inks and labels used
in these new designs, which will be common across the world, are also
recyclable. The new designs have been produced in such a way that they have
significantly reduced the amount of packaging lines that individual plants are
required to keep in stock.
At a regional level, our businesses across the world have been asked to
develop their own sustainability project roadmaps, seeking to ensure that our
efforts are relevant to the highly diverse regions within which we operate.
Projects are running on waste reduction, elimination of various chemicals, and
reducing water and energy usage. More detailed information on climate-related
financial disclosures is found in our sustainability section in the Annual
Report.
Strategic Plan - STEP2 progress
Having created a stronger operational platform for the Group in recent years,
and with a robust balance sheet, we have increased our focus on our strategy
to accelerate performance through value-enhancing acquisitions which will
allow us to benefit from both increased geographical and product coverage, and
leverage synergies from increasing the throughput of our existing facilities.
As a result, we have developed a pipeline of acquisition opportunities which
we believe have the ability to meet our financial and operational criteria.
Such acquisitions will allow us to expand our product and service offering as
well as our customer base, further expand our already diverse product
portfolio into adjacent market sectors, and allow us to capitalise on our
ability to provide customers with high specification products that deliver
real benefits to enhance their own business performance.
The Board has a disciplined approach to appraising acquisition opportunities,
ensuring that potential targets will enhance the Group's wider strategy and
earnings. Additionally, the Board is mindful of retaining a conservative
capital structure, and will ensure that the long-term net debt to EBITDA ratio
is maintained at an acceptable level.
During the year, Renold built on the prior year's acquisition of YUK in Spain
with the acquisition of Davidson Chain in Australia. The Davidson acquisition
will add to the existing Renold capabilities in Australia and is being
integrated into the current Renold site in Melbourne later in calendar year
2024, which will achieve overhead synergies. In keeping with the proven
approach from previous acquisitions, a very methodical integration plan is in
place, to deliver margin improvement including the in-sourcing of third party
purchases. The previous owners of the Davidson business have transferred with
the business and we are delighted that they and their team continue to work
with us.
Organic growth and continual business improvements are fundamental drivers of
the Group strategy. Renold is consistently enhancing its operational
capabilities through upgrading equipment and processes, reflected in the
increased capital expenditure, funded by improving cash generation, whilst
prioritising projects with a short payback period. We are focussing new
product development in larger, faster growing market segments, whilst
leveraging manufacturing cost improvements to penetrate new markets. Capital
equipment suppliers are increasingly solving their pandemic era supply chain
problems and so equipment is available in a sensible timescale.
Our international manufacturing footprint is a major competitive advantage in
the current world of supply chain risk and geo-political tensions. We continue
to expand our capabilities to manufacture our products across multiple
locations giving our customers, and Renold, increasing flexibility and risk
mitigation. There is still a long way to go to completely achieve our ambition
but good progress is being made.
Our Indian business is a particular focus for capital investment and
development in the next few years. We aim to expand the capability of the
business in terms of range, volume output and product specification. As
tariffs on Chinese product remain in place or get greater in many countries
our Indian business will see major opportunities develop internationally and
in its domestic market.
These projects highlight our capital allocation priorities, and the resulting
investment decisions for the Group. With the large infrastructure projects
complete, capital allocation decisions are now less frequently limited purely
by a site's domestic requirements but are focussed on customer service,
upgrading product specification capabilities and optimising revenue growth and
profitability for the Group. For the Chain Division especially, this allows us
to access economies of scale and offer a truly global service with increasing
relevance to large OEM customers. Renold is increasingly an integrated
international supplier and less a series of regional businesses.
The strategic progress made by the Group over recent years has been
significant. Investments in both our production capabilities and our IT
environment have resulted in significant benefits, with:
• Improvements in productivity and operational efficiency as evidenced by
growing sales per employee;
• Greater insight into the performance and opportunities in the business due to
better and more complete data;
• Improvements in the specification and quality of products we are able to make
across our multiple manufacturing sites; and
• Greater flexibility in the cost base as we continue to automate production
processes.
With the ongoing recovery of our end markets, the financial benefits of these
improvements will increasingly come to the fore. Renold is well positioned to
capitalise on these developments in the years ahead.
Current operating environment
The effects of the war in Ukraine, especially in terms of higher prices for
energy and materials as seen in the UK and mainland Europe were less marked in
FY24, only to be replaced with new economic uncertainties brought about by
geopolitical factors, such as de-globalisation and re-shoring, increasing
trade tariffs and the continuing impact of general inflation, higher interest
rates, and growing pressure on labour rates around the world. The volatile
operating environment the Group has faced over recent years abated slightly
during FY24, however we remain conservative around our timing expectations of
a full return to normal, and expect further headwinds to persist to differing
degrees in the new financial year.
Macroeconomic landscape and business positioning
The underlying fundamentals of the Group and the markets we serve provide the
Board with confidence that Renold is well placed to continue to develop and
deliver sustainable profitable growth. Many of these intrinsic qualities have
remained consistent over many years but we are now proactively building on
these fundamentals. They include:
• Valued and recognised brand with well-respected engineering expertise
The Renold brand has been built up over our 150-year history and is trusted by
customers to deliver exceptional products due to our world-class engineering
and product knowledge.
• Global market position and unique geographical manufacturing capability
The global market position of Renold has existed for many years, but following
significant strategic investments in both divisions, the geographic
manufacturing footprint and capabilities we have are unique, permitting us to
service customer demand with increasing levels of flexibility - a critical
factor in a rapidly changing market environment.
• Relatively low cost, but business critical products
Chain and Torque Transmission products are fundamental elements of the systems
into which they are incorporated. Our products are often a small proportion of
the cost of the entire system, but critical to its operation.
• Broad base of customers and end-user markets
Renold products are used in an extremely diverse range of end applications,
sectors, markets and geographies, resulting in a huge spread of customers and
industries served. Markets and applications will change and vary in the
ever-altering environment we operate in but, with its wide spread of products,
geographies, applications and customers, Renold is well positioned.
• High specification products delivering environmental benefits for our
customers
Renold products have always been high specification premium products which
deliver exceptional benefits to customers. Whether through greater efficiency
leading to lower power usage, longer life providing lower lifetime usage of
materials and energy in their manufacture and logistics, or lower lubrication
requirements, Renold products are well placed for an increasingly
environmentally aware marketplace. Our products are capable of helping our
customers meet their sustainability objectives whilst saving them money.
Outlook
I am pleased that the Group continued to perform strongly throughout the year
reflecting the hard work, strategically, commercially and operationally, that
has been undertaken over recent years by our employees across the world. The
business is now at an inflection point where we are starting to see the
compounding impact of the many recent exciting initiatives as they come to
fruition. We have a very clear strategy and are executing it diligently. Our
continuous improvement initiatives are building an increasingly efficient,
productive and resilient business and are providing an ever improving platform
to support our commercial initiatives.
We have been carefully developing our acquisitive growth strategy and
opportunity pipeline. The scale of the highly fragmented industrial chain
market is clear and this is the sole area that we are focussed on for
acquisitions, providing us with many appropriately sized and relatively low
risk opportunities.
Over recent years the business performance has been on an improving trend
despite the many economic and geo-political difficulties. Renold continues to
demonstrate the strength and resilience of its business, its market position
and its business model. We expect the new financial year to be no less
challenging, and we remain vigilant as to the environment within which we
operate. However, we start the year from a positive position with good
momentum and confidence in the capabilities and fundamentals of the Renold
business and the markets we serve.
Robert Purcell
Chief Executive
17 July 2024
Finance Director's review
For the second year running, Renold delivered a record performance with Group
adjusted operating profit increasing by 22.7% to £29.7m. The business
produced an adjusted operating margin of 12.3% (FY23: 9.8%) and achieved a
significant reduction in net debt of £4.9m during the year to £24.9m (31
March 2023: £29.8m).
2024 2023
Reconciliation of reported to adjusted results Order intake Revenue Operating profit Order intake Revenue Operating profit
£m £m £m £m £m £m
Reported 227.5 241.4 30.5 257.5 247.1 22.9
Assignment of lease and cost of closed sites - - (2.3) - - -
Acquisition costs - - 0.5 - - 0.6
Amortisation of acquired intangible assets - - 1.0 - - 0.7
Adjusted 227.5 241.4 29.7 257.5 247.1 24.2
Impact of foreign exchange 7.3 7.9 1.1 - - -
Adjusted at constant exchange rates 234.8 249.3 30.8 257.5 247.1 24.2
revenue AND OPERATING PROFIT
Despite the normalisation of order intake, Group revenue at constant exchange
rates grew by 0.9%, a reduction of 2.3% when currency headwinds are accounted
for. Group revenues for the year were £241.4m (FY23: £247.1m). During the
year the Chain division recorded a 1.6% reduction in turnover at constant
exchange rates to £199.1m, while the Torque Transmission division, which is a
larger order and longer cycle business, increased by 13.1% at constant
exchange rates.
The Group generated an adjusted operating profit for the year of £29.7m
(FY23: £24.2m), excluding the impact of adjusting items as detailed below.
Reported operating profit for the year was £30.5m (FY23: £22.9m). Operating
profit margin, calculated on a statutory basis, was 12.6% (FY23: 9.3%) and
return on sales increased by 250 bps during the year to 12.3% (FY23: 9.8%).
Adjusting items
Adjusting items for FY24 comprise acquisition-related intangible asset
amortisation of £1.0m (FY23: £0.7m), acquisition and re-organisation costs
of £0.5m (FY23: £0.6m) and an exceptional profit on the assignment to a
third party of the lease and costs relating to a closed UK site of £2.3m
(FY23: £nil). Adjusting taxation items comprise a tax charge of £0.8m (FY23:
£nil) in relation to the assignment to a third party of the lease and costs
relating to a closed UK site and a deferred tax credit of £1.0m (FY23: £nil)
arising from the Davidson acquisition.
Foreign exchange rates
The majority of Renold's business is denominated in US Dollars and Euros. The
movements in both of these currencies during the year generated currency
headwinds which reduced sales, adjusted operating profit and net assets when
translated into Sterling in the consolidated financial statements, with sales
reduced by £7.9m and adjusted operating profit by £1.1m.
Phasing of movements over the current and prior year mean the weighted average
exchange rate used to translate the Euro and US Dollar varies to the movement
in the closing rates. The weighted average exchange rates were 1.26 for the US
Dollar and 1.16 for the Euro for the year ended 31 March 2024 (FY23: 1.20 and
1.15 respectively).
FX rates (% of Group sales) 31 Mar 23 31 Mar 24 31 Mar 24 2023 Average 2024 Average 2024
FX rate FX rate Var % FX rate FX rate Var %
GBP/Euro (30%) 1.14 1.17 3% 1.15 1.16 1%
GBP/US$ (37%) 1.24 1.26 2% 1.20 1.26 5%
GBP/C$ (5%) 1.67 1.71 2% 1.60 1.70 6%
GBP/A$ (5%) 1.85 1.94 5% 1.77 1.91 8%
If the year-end exchange rates had applied throughout the year, there would be
an estimated decrease of £2.1m to revenue and £0.3m to operating profit.
FinancE costs
Total finance costs in the year were £7.6m (FY23: £5.6m).
Total loan finance costs include external interest on bank loans and
overdrafts of £3.7m (FY23: £2.3m), amortisation of arrangement fees of
£0.3m (FY23: £0.3m), and £0.8m (FY23: £0.7m) of interest expense on lease
liabilities.
The increase in interest payable on external bank loans and overdrafts was
driven by three factors, firstly the acquisition of YUK for €24.0m during
August 2022 (cash of €20.0m paid in FY23, and a further €2.0m during the
current year), secondly, the impact of successive increases in the UK base
rate during the second half of the prior financial year, and finally the
impact of a small increase in margin following the refinancing in May 2023.
The net IAS 19 finance charge, which is a non-cash item, was £2.7m (FY23:
£2.1m).
Finance costs also include £0.1m (FY23: £0.2m), resulting from the unwind of
discounts on the deferred build costs of the Chinese factory. A payment of
£2.2m was made during the year in relation to this.
Profit before tax
Profit before tax was £22.9m (FY23: £17.3m), an increase of 32.4% during the
year.
Taxation
Excluding the tax effect of the non-recurring items described above, the
effective tax rate on adjusted earnings was 27% (FY23: 27%), and is expected
to be broadly at this level in FY25.
The total tax charge in the year of £5.8m (FY23: £5.5m) is made up of a
current tax charge of £6.5m (FY23: £4.2m) and a deferred tax credit of
£0.7m (FY23: charge of £1.3m). The increase in the current tax charge is
attributable to increased taxable profits in jurisdictions where the headline
statutory tax rate is higher than the prevailing UK tax rate. For further
details see Note 4.
The deferred tax credit in the year primarily relates to the continued
utilisation of tax losses in jurisdictions for which deferred tax is
recognised.
The effective tax rate for the year was 25% (FY23: 32%), which is the same as
the prevailing UK tax rate of 25% (FY23: 19%). The change from the prior year
effective tax rate is primarily driven by the increase in deferred tax
recognition on losses in jurisdictions where we have an increase in projected
future profitability.
EARNINGS PER SHARE
Profit after tax for FY24 was £17.1m (FY23: £11.8m). Adjusted earnings per
share were 7.8p (FY23: 6.5p). Basic earnings per share were 8.3p compared to
5.7p for the year ended 31 March 2023.
2024 2023
£m £m
Adjusted profit after taxation 16.1 13.5
Effect of adjusting items, after tax:
- Assignment of lease and cost of closed sites 1.5 -
- Acquisition costs (0.5) (0.6)
- Amortisation of acquired intangible assets (1.0) (0.7)
- Deferred tax triggered on acquisition 1.0
- Tax adjustments relating to prior year - (0.4)
Profit after taxation 17.1 11.8
Basic adjusted earnings per share 7.8p 6.5p
Basic earnings per share 8.3p 5.7p
Balance sheet
Net assets at 31 March 2024 were £50.2m (31 March 2023: £39.1m). A net
profit of £17.1m was delivered for the year which, together with the impact
of the favourable valuation of the Group's pension liabilities and the
retranslation of overseas operations, resulted in an increase in net assets of
£11.1m.
CASH FLOW AND NET DEBT
FY24 FY23
£m £m
Adjusted operating profit 29.7 24.2
Add back depreciation and amortisation 9.8 10.4
Add back loss on disposal of property, plant and equipment - 0.3
Add back share-based payments 1.4 1.3
Adjusted EBITDA(1) 40.9 36.2
Movement in working capital 1.6 (10.5)
Net capital expenditure (10.1) (8.4)
Operating cash flow(1) 32.4 17.3
Income taxes (3.8) (2.7)
Pensions cash costs (6.0) (5.8)
Repayment of principal under lease liabilities (2.5) (2.9)
Finance costs paid (4.8) (3.3)
Consideration paid for acquisition (5.2) (18.0)
Own shares purchased for the EBT (4.5) -
Other movements (0.7) (0.6)
Change in net debt 4.9 (16.0)
Closing net debt(1) 24.9 29.8
(1) Adjusted EBITDA and operating cash flow are alternative performance
measures as defined in Note 19.
In the financial year the Group reduced net debt by £4.9m to £24.9m (31
March 2023: £29.8m). The Group invested £5.2m (FY23: £18.0m) in
acquisitions, primarily the acquisition of Davidson Chain in Australia, but
also made the first deferred consideration payment for the acquisition of
Industrias YUK (now Renold Iberia) of £1.7m. The Group also acquired £4.5m
of shares to satisfy potential LTIP commitments made through the Employee
Benefit Trust, and also made a payment of £2.2m in respect of the Jintan
factory building in China. Next financial year, the Group will make the final
payment on this building of £2.7m, and make the final payment of deferred
consideration for the YUK acquisition of €2.0m. Net debt at 31 March 2024
comprised cash and cash equivalents of £17.8m (31 March 2023: £19.3m) and
borrowings of £42.7m (31 March 2023: £49.1m).
Inventory levels remained broadly flat in FY24 (FY23: increased by £4.5m).
Trade receivables reduced by £2.9m (FY23: increased by £2.8m) and payables
decreased by £2.7m (FY23: £4.2m).
Net capital expenditure of £10.1m (FY23: £8.4m) increased during the
financial year, reflecting further investment in productivity enhancing
equipment. The Group expects to continue investments in the coming year, in
support of our strategy, aimed at improving heat treatment facilities,
broadening manufacturing capabilities, and product assembly automation,
especially in our Indian and Chinese facilities. Additionally, the
installation of the standard Group ERP system continued as planned.
In September 2023 the Group acquired the trading assets of Davidson Chain a
conveyor chain manufacturer based close to our existing facilities in
Melbourne, Australia. The total consideration was £3.1m, of which £0.1m is
deferred and is to be paid following completion of the merger of the acquired
business into our existing facilities. Professional fees and reorganisation
costs associated with the acquisition amounted to £0.5m. During the prior
financial year, the Group acquired the business of Industrias YUK S.A., based
in Valencia, Spain for a total consideration of €24.0m, of which €20.0m
was paid during FY23, €2.0m was made in FY24 and the final instalment of
€2m is scheduled for FY25.
Pension deficit recovery plan cash costs of £6.0m in FY24 were broadly the
same as in the prior year.
Corporation tax cash paid was £3.8m (FY23: £2.7m), and was paid in
accordance with normal payment on account rules in the countries where the
Group has operations.
Net cash flow from operating activities, shown in a statutory format, was
£32.2m (FY23: £16.7m).
Debt facility and capital structure
During the year the Group renewed its borrowing facilities which now
principally include an £85m multi-currency revolving credit facility until
May 2026, with an option to extend the term for a further two years, together
with a £20.0m accordion option. The net debt/EBITDA covenant was improved
from 2.5 times EBITDA to 3.0 times EBITDA, with other key terms remaining
unchanged.
At 31 March 2024, the Group had unused credit facilities totalling £47.1m (31
March 2023: £17.3m) and cash balances of £17.8m (31 March 2023: £19.3m).
Total Group credit facilities amounted to £90.0m (31 March 2023: £65.9m),
all of which were committed.
The Group has operated well within agreed covenant levels throughout the year
ended 31 March 2024 and expects to continue to operate comfortably within
covenant limits in the coming year.
The net debt/adjusted EBITDA multiple as at 31 March 2024 was 0.6x (31 March
2023: 0.9x), calculated in accordance with the banking agreement. The adjusted
EBITDA/interest cover as at 31 March 2024 was 11.1x (FY23: 13.7x).
Going concern
The financial statements have been prepared on a going concern basis. In
determining the appropriate basis of preparation of the financial statements,
the Directors are required to consider whether the Group can continue in
operational existence for the foreseeable future.
Further information in relation to the Group's business activities, together
with the factors likely to affect its future development, performance and
financial position, liquidity, cash balances and borrowing facilities is set
out in the Chair's statement, the Chief Executive's review, the Finance
Director's review and in the section on principal risks and uncertainties.
Additional details of the Group's cash balances and borrowings and facility
are included in Notes 13, 14 and 17.
The key covenants attached to the Group's multi-currency revolving credit
facility at year end relate to leverage, net debt to EBITDA, maximum 3.0x and
interest cover (minimum 4.0x). The Group regularly monitors its financial
position to ensure that it remains within the terms of its banking covenants,
and has remained within those covenants for the whole of the financial year.
Given the current level of macroeconomic uncertainty stemming from inflation
and geopolitical risks, and being also mindful of the risks discussed in the
section on principal risks and uncertainties, the Group has performed
financial modelling of future cash flows. The Board has reviewed the cash flow
forecasts which cover a period of 12 months from the approval of the 2024
Annual Report, and which reflect forecast changes in revenue across the
Group's business units. A reverse stress test has been performed on the
forecasts to determine the extent of a downturn which would result in a breach
of covenants. Revenue would have to reduce by approximately 46% over the
period under review for the Group to be likely to breach the leverage covenant
under the terms of its borrowing facility. The reverse stress test does not
take into account further mitigating actions which the Group would implement
in the event of a severe and extended revenue decline, such as reducing
discretionary spend and capital expenditure. This assessment indicates that
the Group can operate within the level of its current increased facilities, as
set out above, without the need to obtain any new facilities for a period of
not less than 12 months from the date of this report.
Following this assessment, the Board of Directors is satisfied that the Group
has sufficient resources to continue in operation for a period of not less
than 12 months from the date of this report. Accordingly, they continue to
adopt the going concern basis in relation to this conclusion and preparing the
consolidated financial statements. There are no key sensitivities identified
in relation to this conclusion.
Treasury and financial instruments
The Group's treasury policy, approved by the Board, is to manage its funding
requirements and treasury risks without taking any speculative risks. Treasury
and financing matters are assessed further in the section on principal risks
and uncertainties.
To manage foreign currency exchange impact on the translation of net
investments, certain US Dollar denominated borrowings taken out in the UK to
finance US acquisitions are designated as a hedge of the net investment in US
subsidiaries. At 31 March 2024 this hedge was fully effective. The carrying
value of these borrowings at 31 March 2024 was £2.4m (31 March 2023: £7.3m).
At 31 March 2024, the Group had £0.5m (31 March 2023: £0.5m) of its gross
debt at fixed interest rates. Cash deposits are placed short-term with banks
where security and liquidity are the primary objectives. The Group has no
significant concentrations of credit risk, with sales made to a wide spread of
customers, industries and geographies. Policies are in place to ensure that
credit risk on individual customers is kept to a minimum.
Pension assets and liabilities
The Group has a mix of UK (87% of gross liabilities) and overseas (13% of
gross liabilities) defined benefit pension obligations as shown below.
2024 2023
Assets Liabilities (Deficit)/ surplus Assets Liabilities Deficit
£m £m £m £m £m £m
UK scheme 100.3 (140.0) (39.7) 101.6 (145.8) (44.2)
German scheme - (17.5) (17.5) - (17.7) (17.7)
Other overseas schemes 3.1 (3.0) 0.1 12.9 (13.2) (0.3)
103.4 (160.5) (57.1) 114.5 (176.7) (62.2)
Deferred tax asset 3.0 5.1
Net deficit (54.1) (57.1)
The Group's retirement benefit deficit decreased from £62.2m (£57.1m net of
deferred tax) at 31 March 2023 to £57.1m (£54.1m net of deferred tax) at 31
March 2024. All defined benefit schemes are closed to new members and, with
the exception of one small scheme for workers under a union agreement at the
Westfield plant in the US, are also closed for future accrual.
UK funded scheme
The deficit of the UK scheme decreased in the year to £39.7m (31 March 2023:
£44.2m).
A decrease in gross liabilities of £5.8m arose primarily due to an increase
in the discount rate (5.00% FY24 compared with 4.85% in the prior year). The
long-term CPI inflation assumption remained constant at 2.85%.
Contributions in the year ended 31 March 2024 were £4.6m (FY23: £4.1m). This
includes payment of £0.6m per annum for five years until 2027 to cover a
contribution deferral agreed during the Covid pandemic. The underlying
contribution to the UK scheme increases annually by RPI plus 1.5% (capped at
5%).
Overseas schemes
The largest overseas scheme is in Germany, which is unfunded in line with
normal practice in Germany, with a total liability and thus deficit of £17.5m
(31 March 2023: £17.7m). Cash payments for this scheme were £1.1m (FY23:
£1.2m).
Other overseas schemes are small and are funded, with a combined surplus of
£0.1m (31 March 2023: deficit of £0.3m). Total contributions in the year for
these schemes were £0.3m (FY23: £0.5m). During the year the Group progressed
with the plan to buy-out overseas schemes with the exception of the Union plan
in Westfield and the German scheme. The Canadian and US staff schemes are
expected to be bought-out during FY25.
JIM HAUGHEY
GROUP Finance Director
17 July 2024
Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties of the
Group.
Details of the risks and associated risk management processes, including
financial risks, can be found in the 2024 Annual Report, which be made
available at www.Renold.com
(https://url.uk.m.mimecastprotect.com/s/derlC19v2T6ZPWWIGQ8PG?domain=renold.com)
.
The risks referred to and which could have a material impact on the Group's
ongoing financial performance, are as follows:
· Macroeconomic and political volatility;
· Strategy execution;
· Product liability;
· Health and safety in the workplace;
· Security and effective deployment and utilisation of information technology
systems;
· Prolonged loss of a major manufacturing site;
· People and change;
· Liquidity, foreign exchange and banking arrangements;
· Pension deficit; and
· Legal, financial and regulatory compliance
Consolidated Income Statement
for the year ended 31 March 2024
Note 2024 2023
£m £m
Revenue 1 241.4 247.1
Operating costs 2 (210.9) (224.2)
Operating profit 30.5 22.9
Finance costs 3 (7.6) (5.6)
Profit before tax 22.9 17.3
Taxation 4 (5.8) (5.5)
Profit for the financial year 17.1 11.8
Earnings per share 5
Basic earnings per share 8.3p 5.7p
Diluted earnings per share 7.3p 5.1p
Basic adjusted earnings per share(1) 7.8p 6.5p
Diluted adjusted earnings per share(1) 6.9p 5.9p
(1) Definitions of adjusted measures are provided in alternative performance
measures in Note 19.
All results are from continuing operations.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
2024 2023
£m £m
Profit for the financial year 17.1 11.8
Items that may be reclassified to the income statement in subsequent years:
Exchange differences on translation of foreign operations (4.0) 2.7
Gain/(loss) on hedges of the net investment in foreign operations 0.5 (0.8)
Cash flow hedges:
(Loss)/gain arising on cash flow hedges during the year (0.3) 0.3
Less: Cumulative (loss)/gain arising on cash flow hedges reclassified to (0.2) 0.6
profit or loss
Income tax relating to items that may be reclassified subsequently to profit 0.1 (0.2)
or loss
(3.9) 2.6
Items not to be reclassified to the income statement in subsequent years:
Remeasurement gains on retirement benefit obligations 1.4 22.2
Tax on remeasurement gains on retirement benefit obligations - excluding (0.4) (5.8)
impact of statutory rate change
1.0 16.4
Other comprehensive (loss)/income for the year, net of tax (2.9) 19.0
Total comprehensive income for the year, net of tax 14.2 30.8
Consolidated Balance Sheet
as at 31 March 2024
2024 2023(1)
Note £m £m
ASSETS
Non-current assets
Goodwill 7 29.3 28.2
Intangible assets 8 11.5 10.9
Property, plant and equipment 9 56.1 56.8
Right-of-use assets 10 15.1 16.5
Deferred tax assets 7.7 8.4
119.7 120.8
Current assets
Inventories 11 60.6 61.8
Trade and other receivables 12 39.8 43.5
Current tax 0.1 0.6
Derivative financial instruments - 0.3
Cash and cash equivalents 13 17.8 19.3
118.3 125.5
TOTAL ASSETS 238.0 246.3
LIABILITIES
Current liabilities
Borrowings 14 (3.8) (47.3)
Trade and other payables 15 (53.7) (57.2)
Lease liabilities 10 (2.3) (2.7)
Current tax (8.6) (6.6)
Derivative financial instruments (0.3) -
Provisions 16 (1.6) (0.9)
(70.3) (114.7)
NET CURRENT ASSETS 48.0 10.8
Non-current liabilities
Borrowings 14 (38.4) (1.3)
Preference stock 14 (0.5) (0.5)
Trade and other payables 15 - (2.5)
Lease liabilities 10 (12.8) (17.5)
Deferred tax liabilities (3.7) (4.4)
Retirement benefit obligations (57.1) (62.2)
Provisions 16 (5.0) (4.1)
(117.5) (92.5)
TOTAL LIABILITIES (187.8) (207.2)
NET ASSETS 50.2 39.1
EQUITY
Issued share capital 11.3 11.3
Currency translation reserve 8.0 11.5
Other reserves (8.8) (4.5)
Retained earnings 39.7 20.8
TOTAL SHAREHOLDERS' FUNDS 50.2 39.1
(1) See Note 17 of the Annual Report.
Approved by the Board on 17 July 2024 and signed on its behalf by:
Robert Purcell Jim Haughey
CHIEF EXECUTIVE FINANCE DIRECTOR
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
Share capital Retained earnings Currency translation reserve Other reserves Total shareholders' funds
£m £m £m £m £m
At 31 March 2022 11.3 (8.7) 9.8 (5.4) 7.0
Profit for the year - 11.8 - - 11.8
Other comprehensive income - 16.4 1.7 0.9 19.0
Total comprehensive income for the year - 28.2 1.7 0.9 30.8
Share based payments - 1.3 - - 1.3
At 31 March 2023 11.3 20.8 11.5 (4.5) 39.1
Profit for the year - 17.1 - - 17.1
Other comprehensive income/(loss) - 1.0 (3.5) (0.4) (2.9)
Total comprehensive income/(loss) for the year - 18.1 (3.5) (0.4) 14.2
Own shares purchased - - - (4.5) (4.5)
Settlement of share schemes - (0.6) - 0.6 -
Share based payments - 1.4 - - 1.4
At 31 March 2024 11.3 39.7 8.0 (8.8) 50.2
Included in retained earnings is £3.9m (31 March 2023: £2.7m) relating to a
share option reserve.
The other reserves include Renold shares held by the Renold plc Employee
Benefit Trust. The Renold Employee Benefit Trust holds Renold plc shares and
satisfies awards made under various employee incentive schemes when issuance
of new shares is not appropriate.
At 31 March 2024 27,583,116 (31 March 2023: 16,888,938) ordinary shares of 5p
each were held by the Renold Employee Benefit Trust and, following
recommendations by the employer, are provisionally allocated to satisfy awards
under employee incentive schemes. The market value of these shares at 31 March
2024 was £10.3m (31 March 2023: £4.3m).
Consolidated Statement of Cash Flows
for the year ended 31 March 2024
2024 2023
Note £m £m
Cash flows from operating activities 17
Cash generated from operations 36.0 19.4
Income taxes paid (3.8) (2.7)
Net cash flow from operating activities 32.2 16.7
Cash flows used in investing activities
Proceeds from property disposals 0.1 -
Cash outflow on disposal of right-of-use assets (0.6) -
Purchase of property, plant and equipment (8.3) (7.0)
Purchase of intangible assets (1.3) (1.4)
Consideration paid for acquisitions net of cash acquired 18 (4.7) (14.5)
Net cash flow used in investing activities (14.8) (22.9)
Cash flows from financing activities
Repayment of principal under lease liabilities (2.5) (2.9)
Finance costs paid (4.5) (3.0)
Own shares purchased (4.5) -
Proceeds from borrowings 58.8 28.3
Repayment of borrowings (67.4) (8.3)
Net cash flow (used in)/from financing activities (20.1) 14.1
Net (decrease)/increase in cash and cash equivalents (2.7) 7.9
Net cash and cash equivalents at beginning of year 17.5 9.5
Effects of exchange rate changes (0.7) 0.1
Net cash and cash equivalents at end of year 13 14.1 17.5
Accounting Policies
Basis of preparation
The financial information for the year ended 31 March 2024 and the year ended
31 March 2023 does not constitute the Company's statutory accounts for those
years but is derived from those accounts. Statutory accounts for the year
ended 31 March 2023 have been delivered to the Registrar of Companies. The
auditor's report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2024 have been authorised
for issue and signed by the Board of Directors at the time of this
announcement. They are expected to be published on or before 9 August 2024 and
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting.
Going concern
The financial statements have been prepared on a going concern basis. In
determining the appropriate basis of preparation of the financial statements,
the Directors are required to consider whether the Group can continue in
operational existence for the foreseeable future.
Further information in relation to the Group's business activities, together
with the factors likely to affect its future development, performance and
financial position, liquidity, cash balances and borrowing facilities is set
out in the Strategic Report section of the Annual Report. In addition, the
financial statements within the Annual Report include the Group's objectives,
policies and processes for managing its capital, its financial risk management
objectives, details of its financial instruments and hedging activities and
its exposure to foreign exchange, credit and interest rate risk.
The key covenants attached to the Group's multi-currency revolving credit
facility relate to leverage (net debt to EBITDA, maximum 3.0x) and interest
cover (minimum 4.0x), which are measured in line with definitions laid out
within the banking covenants, and on a post IFRS 16 basis for both EBITDA and
bank debt. The Group regularly monitors its financial position to ensure that
it remains within the terms of its banking covenants. The Group's net debt
decreased by £4.9m to £24.9m (31 March 2023: £29.8m). The Group has
accordingly remained within the borrowing covenant levels throughout the year
ended 31 March 2024.
Given the current level of macroeconomic uncertainty stemming from Covid-19,
inflation, the global supply chain crisis and geopolitical risks, and being
also mindful of the risk matrix disclosed in the section on principal risks
and uncertainties, the Group has performed financial modelling of future cash
flows. The Board has reviewed the cash flow forecasts, which cover a period of
12 months from the approval of the 2024 Annual Report, and which reflect
forecasted changes in revenue across the Group's business units. A reverse
stress test has been performed on the forecasts to determine the extent of
downturn which would result in a breach of covenants. Revenue would have to
reduce by 24% over the period under review for the Group to breach the
leverage covenant under the terms of its borrowing facility. The reverse
stress test does not take into account further mitigating actions which the
Group would implement in the event of a severe and extended revenue decline,
such as reducing discretionary spend and capital expenditure. This assessment
indicates that the Group can operate within the level of its current
facilities, as set out above, without the need to obtain any new facilities
for a period of not less than 12 months from the date of this report.
Following this assessment, the Board of Directors are satisfied that the Group
has sufficient resources to continue in operation for a period of not less
than 12 months from the date of this report. Accordingly, they continue to
adopt the going concern basis in relation to this conclusion and preparing the
Consolidated Financial Statements. There are no key sensitivities identified
in relation to this conclusion.
Notes to the Consolidated Financial Statements
1. Segmental information
For management purposes, the Group is organised into two operating segments
according to the nature of their products and services and these are
considered by the Directors to be the reportable operating segments of Renold
plc as shown below:
• The Chain segment manufactures and sells power transmission and
conveyor chain and also includes sales of torque transmission products through
Chain National Sales Companies (NSCs); and
• The Torque Transmission segment manufactures and sells torque
transmission products, such as gearboxes and couplings.
No operating segments have been aggregated to form the above reportable
segments.
The Chief Operating Decision Maker (CODM) for the purposes of IFRS 8
'Operating Segments' is considered to be the Board of Directors of Renold plc.
Management monitor the results of the separate reportable operating segments
based on operating profit and loss which is measured consistently with
operating profit and loss in the consolidated financial statements. The same
segmental basis applies to decisions about resource allocation. Disclosure has
been included in respect of working capital as opposed to operating assets of
each segment as this is the measure reported to the CODM on a regular basis.
However, Group finance costs, retirement benefit obligations and income taxes
are managed on a Group basis and therefore are not allocated to operating
segments. Transfer prices between operating segments are on an arm's length
basis in a manner similar to transactions with third parties.
Chain(2) Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2024 £m £m £m £m
Revenue
External customer - transferred at a point in time 191.9 45.3 - 237.2
External customer - transferred over time - 4.2 - 4.2
Inter-segment(1) 0.9 4.0 (4.9) -
Total revenue 192.8 53.5 (4.9) 241.4
Operating profit/(loss) 32.8 8.4 (10.7) 30.5
Finance costs (7.6)
Profit before tax 22.9
Taxation (5.8)
Profit after tax 17.1
Other disclosures
Working capital(3) 43.4 11.0 (7.7) 46.7
Capital expenditure(4) 5.3 2.4 1.3 9.0
Total depreciation and amortisation 7.1 1.7 2.0 10.8
1. Segmental information (continued)
Chain(2) Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2023 £m £m £m £m
Revenue
External customer - transferred at a point in time 201.5 43.4 - 244.9
External customer - transferred over time - 2.2 - 2.2
Inter-segment(1) 0.9 3.2 (4.1) -
Total revenue 202.4 48.8 (4.1) 247.1
Operating profit/(loss) 26.5 5.4 (9.0) 22.9
Finance costs (5.6)
Profit before tax 17.3
Taxation (5.5)
Profit after tax 11.8
Other disclosures
Working capital(3) 44.0 10.9 (6.8) 48.1
Capital expenditure(4) 5.6 2.2 1.2 9.0
Total depreciation and amortisation 6.9 1.6 2.6 11.1
1. Inter-segment revenues are eliminated on consolidation.
2. Included in Chain external sales is £6.9m (2023: £5.2m) of Torque
Transmission product sold through the Chain NSCs, usually in countries where
Torque Transmission does not have its own presence.
3. The measure of segment assets reviewed by the CODM is total working capital,
defined as inventories and trade and other receivables, less trade and other
payables. Working capital is also measured as a ratio of rolling annual sales.
4. Capital expenditure consists of additions to property, plant and equipment and
intangible assets.
In addition to statutory reporting, the Group reports certain financial
metrics on an adjusted basis (alternative performance measures, APMs).
Definitions of adjusted measures, and information about the differences to
statutory metrics are provided in Note 19. Current year adjusting items
include a £1.0m (2023: £0.7m) of amortisation of acquired intangibles (Chain
segment) and £0.5m (2023: £0.6m) of acquisition costs and £2.3m (2023:
£nil) income relating to assignment of lease and costs of closed sites.
Constant exchange rate results are current period results retranslated using
prior year exchange rates. A reconciliation is provided below and in Note 19.
Future performance obligations
The transaction price allocated to performance obligations that are
unsatisfied or partially unsatisfied at 31 March 2024 is £83.6m (2023:
£99.5m). This mostly comprises of the obligation to manufacture and supply
standard Group products. The majority of this revenue is recognised at a point
in time.
An amount of £13.3m (2023: £17.0m) relates to revenue from a small number of
large customer contracts, for which revenue is recognised over time in line
with progress against performance obligations. This revenue is expected to be
recognised over the next seven years (2023: over the next eight years).
Chain Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2024 £m £m £m £m
Revenue
External customer - transferred at a point in time 191.9 45.3 - 237.2
External customer - transferred over time - 4.2 - 4.2
Inter-segment 0.9 4.0 (4.9) -
Foreign exchange retranslation 6.3 1.7 (0.1) 7.9
Total revenue at constant exchange rates 199.1 55.2 (5.0) 249.3
Operating profit/(loss) 32.8 8.4 (10.7) 30.5
Foreign exchange retranslation 0.9 0.3 (0.1) 1.1
Operating profit/(loss) at constant exchange rates 33.7 8.7 (10.8) 31.6
Segmental information (continued)
Geographical analysis of external sales by destination, non-current asset
location and average employee numbers
The UK is the home country of the parent company, Renold plc. The principal
operating territories, the proportions of Group external revenue generated
(customer location), external revenues, non-current assets (asset location)
and average employee numbers in each are as follows:
Revenue ratio External revenues Non-current assets Average
employee numbers
2024 2023 2024 2023 2024 2023 2024 2023
% % £m £m £m £m
United Kingdom 9.1 7.7 21.9 19.1 13.8 13.3 293 280
Rest of Europe 29.7 29.6 71.8 73.2 39.1 42.1 571 585
US & Canada 42.0 42.1 101.1 103.9 33.7 33.5 281 282
Australasia 10.5 10.2 25.4 25.3 6.9 4.7 138 125
China 4.0 5.0 9.7 12.4 13.4 14.3 227 247
India 3.2 3.8 7.8 9.3 5.1 4.5 330 335
Other countries 1.5 1.6 3.7 3.9 - - - -
100.0 100.0 241.4 247.1 112.0 112.4 1,840 1,854
All revenue relates to the sale of goods and services. No individual customer,
or group of customers, represents more than 10% of Group revenue (2023: None
more than 10%).
Non-current assets consist of goodwill, other intangible assets, right-of-use
assets and property, plant and equipment. Deferred tax assets are not included
above.
Employees are categorised as direct or indirect. The split of average employee
numbers are direct 981 (2023: 1,038) and indirect 859 (2023: 816).
2. Operating costs
Operating profit is stated after charging/(crediting):
2024 2023
£m £m £m £m
Change in finished goods and work in progress (0.5) (3.0)
Raw materials and consumables 81.1 88.3
Other external charges 37.5 44.1
Employee costs
Gross wages and salaries 67.0 67.9
Social security costs 9.7 8.8
Pension costs
- defined benefit - 0.1
- defined contribution 1.4 1.2
Share-based incentive plans (including related social security costs) 1.9 1.5
80.0 79.5
Depreciation of property, plant and equipment
- owned assets 6.1 6.1
- right-of-use assets 2.7 2.5
Amortisation of intangible assets 1.1 1.8
Amortisation of acquired intangible assets 1.0 0.7
Acquisition costs 0.5 0.6
Short-term leases and leases of low-value assets - plant and machinery 0.1 0.2
Loss on disposal of owned property, plant and equipment - 0.3
Research and development expenditure 0.8 0.7
Auditor's remuneration 0.9 0.8
Impairment losses and gains (including reversals of impairment losses) on
financial assets
- trade receivables impairment - 0.4
Net foreign exchange losses 0.7 0.5
Pension administration costs 1.2 0.7
Non-recurring profit on disposal of right-of-use asset and associated lease (2.3) -
liability
Total operating costs 210.9 224.2
During the current year a non-recurring gain of £2.3m was recorded in
relation to the reassignment of the Bredbury head lease on 21 July 2023. For
further details refer to Note 10.
3. Finance costs
2024 2023
£m £m
Finance costs:
Interest payable on bank loans and overdrafts(1) 3.7 2.3
Interest expense on lease liabilities(1) 0.8 0.7
Amortised financing costs(1) 0.3 0.3
Loan finance costs 4.8 3.3
Net IAS 19 finance costs 2.7 2.1
Discount unwind on non-current trade and other payables 0.1 0.2
Finance costs 7.6 5.6
(1) Amounts arising on financial liabilities measured at amortised cost.
4. Taxation
Analysis of tax charge in the year
2024 2023
£m £m
United Kingdom
UK corporation tax at 25% (2023: 19%) 0.8 (0.1)
Overseas taxes
Corporation taxes 4.4 2.6
Movement in uncertain tax positions - 0.7
Adjustments in respect of prior periods 1.0 0.7
Withholding taxes 0.3 0.3
Current income tax charge 6.5 4.2
Deferred tax
UK - origination and reversal of temporary differences 1.3 0.2
Overseas - origination and reversal of temporary differences 1.1 1.5
Adjustments in respect of prior periods (0.7) (0.4)
Movement in unprovided deferred tax balances (2.4) -
Total deferred tax (credit)/charge (0.7) 1.3
Tax charge on profit on ordinary activities 5.8 5.5
2024 2023
£m £m
Tax on items taken to other comprehensive income
Deferred tax on changes in net pension deficits 0.4 5.8
Tax on fair value of derivatives direct to reserves (0.1) 0.2
Tax charge in the statement of other comprehensive income 0.3 6.0
Factors affecting the Group tax charge for the year
The increase in the current tax charge is attributable to increased taxable
profits in jurisdictions where the headline statutory tax rate is higher than
the prevailing UK tax rate. The deferred tax credit in the year primarily
relates to an increase in the deferred tax assets recognised in the Group
across the period due to an increase in the estimated profitability of the
Group for the 5-year period.
At 31 March 2024, the provision for open tax matters totalled £1.8m (31 March
2023: £1.8m).
The Group's tax charge in future years will be affected by the profit mix,
effective tax rates in the different countries where the Group operates and
utilisation of tax losses. No deferred tax is recognised on the gross
unremitted earnings of £25.5m of overseas subsidiaries in accordance with IAS
12.39.
The actual tax on the Group's profit before tax differs from the theoretical
amount using the UK corporation tax rate as follows:
2024 2023
£m £m
Profit on ordinary activities before tax 22.9 17.3
Tax charge at UK statutory rate of 25% (2023: 19%) 5.7 3.3
Effects of:
Non-taxable income (0.1) -
Non-deductible expenditure 1.6 0.7
Other deductible - (0.1)
Movement in uncertain tax positions - 0.7
Overseas tax rate differences 0.5 0.9
Adjustments in respect of prior periods 0.3 (1.0)
Movement in unrecognised deferred tax (2.5) 0.7
Withholding taxes 0.3 0.3
Total tax charge 5.8 5.5
4. Taxation (continued)
Effective tax rate
The effective tax rate of 25% (2023: 32%) is the same as the prevailing UK tax
rate of 25% (2023: 19%).
The change from the prior year effective tax rate is primarily driven by the
increase in deferred tax recognition on losses in jurisdictions where there
has been an increase in the projected future profitability based on updated
information received by Management.
Tax payments
Cash tax paid in the year was £3.8m (2023: £2.7m). The year on year increase
is attributable to higher taxable profits in full cash tax paying territories,
including the closure of an historical tax enquiry.
5. Earnings per share
Earnings per share (EPS) is calculated by reference to the earnings for the
year and the weighted average number of shares in issue during the year as
follows:
2024 2023
Earnings Shares Per share amount Earnings Shares Per share amount
£m (thousands) (pence) £m (thousands) (pence)
Basic EPS - Profit attributed to ordinary shareholders 17.1 206,908 8.3 11.8 207,242 5.7
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets 1.0 0.5 0.7 0.3
Acquisition costs 0.5 0.2 0.6 0.3
- Deferred tax triggered on acquisition(1) (1.0) (0.5) - -
Assignment of lease and cost of closed sites (2.3) (1.1) - -
- Tax on assignment of lease and cost of closed sites 0.8 0.4 - -
Tax adjustments relating to prior year - - 0.4 0.2
Adjusted EPS 16.1 206,908 7.8 13.5 207,242 6.5
(1)For the year ended 31 March 2024, £1.0m of deferred tax asset was
recognised on brought forward tax losses for the Group's Australian entity,
triggered by the acquisition of the trading assets of Davidson Chain PTY
("Davidson"). The acquisition resulted in a step change in the profitability
of the Australian business such that it is now probable that taxable profits
exist, against which previously unrecognised tax losses and temporary
differences can be utilised. Consistent with the amortisation of acquired
intangibles and other significant, non-recurring items, the deferred tax
credit has been excluded for the purposes of calculating adjusted EPS as it
represents a significant non-recurring and acquisition-related item.
Inclusion of the dilutive securities, comprising 27,488,748 (2023: 23,003,207)
additional shares due to share options, in the calculation of basic and
adjusted EPS changes the amounts shown above to 7.3p and 6.9p respectively
(2023: basic EPS 5.1p, adjusted EPS 5.9p).
The adjusted EPS numbers have been provided in order to give a useful
indication of underlying performance by the exclusion of adjusting items. Due
to the existence of unrecognised deferred tax assets there were no associated
tax credits on some of the adjusting items and in these instances adjusting
items are added back in full.
6. Dividends
No ordinary dividend payments were paid in either the current or prior year.
The Board fully recognises the importance of dividends as part of the overall
value creation proposition for shareholders. The Board has carefully reviewed
its capital allocation priorities, and believes that both organic and
inorganic investment opportunities remain available to the Group. We are also
aware of the continued and sustainable progress in terms of profitability, and
cash generation that the Group has made over recent years, and we now believe
that the Group can capitalise on these investment opportunities, while also
introducing a dividend payment to shareholders.
The Company seeks to pay a sustainable and affordable dividend having regard
to the current financial circumstances of the business and the Company's
operational cash requirements. Accordingly, the Board is recommending an
ordinary dividend of 0.5p per share for the year ended 31 March 2024, with a
total value of £1.0m. The dividend, if approved by shareholders at the 2024
Annual General Meeting, will be paid on 17 September 2024 to shareholders on
the register as at 9 August 2024. The shares will be marked ex-dividend on 8
August 2024.
7. Goodwill
2024 2023
£m £m
Cost
At 1 April 31.7 26.2
Acquisition of subsidiary (Note 18) 1.8 4.2
Exchange adjustment (0.6) 1.3
At 31 March 32.9 31.7
Accumulated amortisation and impairment
At 1 April 3.5 3.5
Exchange adjustment 0.1 -
At 31 March 3.6 3.5
Carrying amount 29.3 28.2
Impairment testing
The Group performed its annual impairment test of goodwill at 31 March 2024
which compares the current book value to the recoverable amount from the
continued use or sale of the related business.
The recoverable amount of each Cash Generating Unit (CGU) has been determined
on a value-in-use basis, calculated as the net present value of cash flows
derived from detailed financial plans. All business units in the Group have
submitted a budget for the financial year ending 31 March 2025 and strategic
plan forecasts for the two financial years ending 31 March 2027. The budget
and strategic forecasts, which are subject to detailed review and challenge,
were approved by the Board. The Group prepares cash flow forecasts based on
these projections for the first three years, with years four and five
extrapolated based on known future events, recently observable trends and
management expectations. A terminal value calculation is used to estimate the
cash flows after year five. Sensitivity analysis has been performed including
a zero revenue growth scenario (with current year revenue modelled for all
future periods of the forecast) and a reverse stress test, to determine the
extent of downturn which would result in a potential impairment. Revenue would
have to reduce by 24% in the first year of the period under review (worse than
the decline seen during the Covid pandemic) for the first CGU containing
goodwill to require potential impairment. Under the reverse stress test the
first CGU with headroom that eliminated was Europe & China. The forecasts
used for the impairment review are consistent with those used in the Going
Concern review.
The key assumptions used in the value-in-use calculations are:
• Sales: Forecast sales are built up with reference to expected
sales prices and volumes from individual markets and product categories based
on past performance, projections of developments in key markets and
management's judgement;
• Margins: Forecast margins reflect historical performance and
management's experience of each CGUs profitability at the forecast level of
sales including the impact of all completed restructuring projects. The
projections do not include the impact of future restructuring projects to
which the Group is not yet committed;
• Discount rate: Pre-tax discount rates have been calculated based
on the Group's weighted average cost of capital and risks specific to the CGU
being tested; and
• Long-term growth rates: As required by IAS 36, cash flows beyond
the period of projections are extrapolated using long-term growth rates
published by the Organisation for Economic Co-operation and Development for
the territory in which the CGU is based. The discount rates applied to the
cash flows of each of the CGUs are based on the risk-free rate for long-term
bonds issued by the government in the respective market. This is then adjusted
to reflect both the increased risk of investing in equities and the systematic
risk of the specific CGU (using an average of the betas of comparable
companies). These rates do not reflect the long-term assumptions used by the
Group for investment planning.
The Directors do not consider that any reasonably possible changes to the key
assumptions would reduce the recoverable amount to its carrying value for any
CGU. No impairment charge has been recognised in the current or prior period
for any CGU. The goodwill acquired in the year relating to Davidson has been
allocated to the Australia CGU.
7. Goodwill (continued)
Growth rates CGU discount rates Carrying values
(pre-tax)
2024 2023 2024 2023 2024 2023
% % % % £m £m
Americas (Jeffrey Chain) 2.1 2.0 12.7 15.0 20.8 21.4
Australia (Ace Chains, Davidson Chain) 2.3 2.2 10.4 12.1 2.2 0.5
India (Renold Chain) 6.3 6.4 15.9 20.4 1.7 1.6
Europe & China (Renold Tooth Chain, YUK) 1.2 1.7 15.1 15.5 4.6 4.7
29.3 28.2
8. Intangible assets
Customer orderbook Customer relationships Technical know-how Non-compete agreements Computer software Total
£m £m £m £m £m £m
Cost
At 1 April 2022 0.3 4.6 0.2 - 19.9 25.0
Exchange adjustment - 0.3 - - 0.1 0.4
Additions - - - - 1.4 1.4
Acquisition of subsidiary - 5.1 - 1.8 - 6.9
At 31 March 2023 0.3 10.0 0.2 1.8 21.4 33.7
Exchange adjustment - (0.2) - - (0.3) (0.5)
Additions - - - - 1.3 1.3
Recategorisation (Note 9) - - - - 0.5 0.5
Disposals - - - - (0.1) (0.1)
Acquisition of subsidiary (Note 18) - 0.7 - 0.4 - 1.1
At 31 March 2024 0.3 10.5 0.2 2.2 22.8 36.0
Accumulated amortisation and impairment
At 1 April 2022 0.3 4.2 0.2 - 15.2 19.9
Exchange adjustment - 0.2 - - 0.2 0.4
Amortisation charge - 0.5 - 0.2 1.8 2.5
At 31 March 2023 0.3 4.9 0.2 0.2 17.2 22.8
Exchange adjustment - (0.3) - - - (0.3)
Amortisation charge - 0.7 - 0.4 1.0 2.1
Disposals - - - - (0.1) (0.1)
At 31 March 2024 0.3 5.3 0.2 0.6 18.1 24.5
Net book amount
At 31 March 2024 - 5.2 - 1.6 4.7 11.5
At 31 March 2023 - 5.1 - 1.6 4.2 10.9
During the year amounts have been recognised in accordance with IFRS 3 in
relation to customer lists and non-compete agreements as a result of the
acquisition of Davidson (Note 18). The customer relationships acquired have
been valued using estimates of useful lives and discounted cash flows of
expected income, and the non-compete agreements have been valued using the
comparative income differential method.
The prior year acquisition of the Industrias YUK S.A. business resulted in the
recognition of amounts in relation to customer lists and non-compete
agreements. The remaining amounts recognised for customer relationships,
customer orderbook and technical know-how were acquired with the acquisition
of the Brooks business and the Tooth Chain (Germany) business, of which the
latter is now fully depreciated.
No brand names have been acquired in the current year acquisition or previous
acquisitions.
9. Property, plant and equipment
Land and buildings Plant and equipment Total
£m £m £m
Cost
At 1 April 2022 25.1 123.6 148.7
Exchange adjustment 0.3 3.5 3.8
Additions 0.2 7.4 7.6
Disposals - (1.8) (1.8)
Recategorisation 0.3 (0.3) -
Acquisition of subsidiary - 5.4 5.4
At 31 March 2023 25.9 137.8 163.7
Exchange adjustment (0.9) (3.6) (4.5)
Additions 0.4 7.3 7.7
Disposals (0.2) (2.7) (2.9)
Recategorisation (Note 8) 0.7 (1.2) (0.5)
Acquisition of subsidiary (Note 18) - 0.1 0.1
At 31 March 2024 25.9 137.7 163.6
Accumulated depreciation and impairment
At 1 April 2022 8.1 91.3 99.4
Exchange adjustment 0.2 2.7 2.9
Charge for the year 0.6 5.5 6.1
Disposals - (1.5) (1.5)
At 31 March 2023 8.9 98.0 106.9
Exchange adjustment (0.2) (2.5) (2.7)
Charge for the year 0.6 5.5 6.1
Disposals (0.2) (2.6) (2.8)
At 31 March 2024 9.1 98.4 107.5
Net book amount
At 31 March 2024 16.8 39.3 56.1
At 31 March 2023 17.0 39.8 56.8
Property, plant and equipment pledged as security for liabilities amounted to
£35.2m (2023: £34.5m).
Future capital expenditure
At 31 March 2024 capital expenditure contracted for but not provided for in
these accounts amounted to £1.7m (2023: £2.6m).
10. Leasing and right-of-use assets
Right-of-use assets
Land and buildings Plant and equipment Total
£m £m £m
Cost
At 1 April 2022 12.6 2.0 14.6
Exchange adjustment 0.1 - 0.1
Acquisition of subsidiary 9.5 0.1 9.6
Additions 1.0 0.4 1.4
Disposals (0.4) (0.8) (1.2)
At 31 March 2023 22.8 1.7 24.5
Exchange adjustment (0.5) - (0.5)
Additions 1.7 1.4 3.1
Recategorisation - (0.1) (0.1)
Disposals (4.4) (0.5) (4.9)
At 31 March 2024 19.6 2.5 22.1
Accumulated depreciation and impairment
At 1 April 2022 5.4 1.2 6.6
Exchange adjustment 0.1 - 0.1
Charge for the year 2.0 0.5 2.5
Disposals (0.4) (0.8) (1.2)
At 31 March 2023 7.1 0.9 8.0
Exchange adjustment (0.1) 0.1 -
Charge for the year 2.0 0.6 2.6
Recategorisation - (0.1) (0.1)
Disposals (3.0) (0.5) (3.5)
At 31 March 2024 6.0 1.0 7.0
Net book amount
At 31 March 2024 13.6 1.5 15.1
At 31 March 2023 15.7 0.8 16.5
Lease liabilities
2024 2023
£m £m
Maturity analysis - contractual undiscounted cash flows
Less than one year 2.9 3.5
One to two years 2.6 3.1
Two to five years 4.4 6.6
More than five years 11.2 14.1
Total undiscounted lease liabilities at 31 March 21.1 27.3
Less: Interest allocated to future periods (6.0) (7.1)
Lease liabilities included in the Consolidated Balance Sheet 15.1 20.2
Current 2.3 2.7
Non-current 12.8 17.5
Amounts recognised in profit or loss
2024 2023
£m £m
Interest on lease liabilities (0.8) (0.7)
Non-recurring profit on disposal of right-of-use asset and associated lease 2.3 -
liability
Expenses relating to short-term leases and leases of low-value assets (0.1) (0.2)
10. Leasing and right-of-use assets (continued)
Amounts recognised in the Consolidated Statement of Cash Flows
2024 2023
£m £m
Repayment of principal under lease liabilities 2.5 2.9
Repayment of interest on lease liabilities 0.8 0.7
Cash outflows in relation to short-term leases and leases of low-value assets 0.1 0.2
Total cash outflows for leases 3.4 3.8
11. Inventories
2024 2023
£m £m
Raw materials 8.9 9.1
Work in progress 7.2 5.8
Finished products and production tooling 44.5 46.9
60.6 61.8
Inventories pledged as security for liabilities amounted to £42.7m (2023:
£43.2m).
The Group expensed £81.1m (2023: £88.3m) of inventories during the period.
In the year to 31 March 2024, £1.9m (2023: £3.5m) was charged for the
write-down of inventory and £1.5m (2023: £0.2m) was released from inventory
provisions no longer required.
12. Trade and other receivables
2024 2023
£m £m
Trade receivables 33.2 39.3
Less: Loss allowance (0.4) (0.8)
Trade receivables: net(1) 32.8 38.5
Other receivables 3.0 1.9
Contract assets - 0.1
Prepayments 4.0 3.0
39.8 43.5
(1) Financial assets carried at amortised cost.
The Group has no significant concentration of credit risk but does have a
concentration of translational and transactional foreign exchange risk in both
US Dollars and Euros; however, the Group hedges against these risks. The
carrying amount of trade and other receivables approximates their fair value.
Trade receivables are non-interest bearing and are generally on 30-90 days
terms. The average credit period on sales of goods is 51 days (2023: 49 days).
Other receivables largely relate to VAT and hence given that the
counterparties are governments, no provision for loss allowance has been
made.
Contract assets relate to consideration not yet received upon the completion
of the associated performance obligation. Revenue recognised in the reporting
period that was included in the contract assets at beginning of the year
totalled £nil (2023: £0.1m).
The following table details the risk profile of trade receivables based on the
Group's provision matrix. As the Group's historical credit loss experience
does not show significantly different loss patterns for different customer
segments, the provision for loss allowance based on past due status is not
further analysed:
Trade receivables - days past due
At 31 March 2024 Not past due <30 days 30-60 days 60-90 days >90 days Total
Trade receivables: gross 27.8 3.6 0.5 0.5 0.8 33.2
Expected credit loss rate, % 0.3% 0.0% 0.2% 1.2% 43.1% 1.2%
Estimated gross carrying amount at default, £m 0.1 - - - 0.3
Lifetime expected credit loss, £m 0.4
12. Trade and other receivables (continued)
Trade receivables - days past due
At 31 March 2023 Not past due <30 days 30-60 days 60-90 days >90 days Total
Trade receivables: gross 34.0 3.3 0.6 0.4 1.0 39.3
Expected credit loss rate, % 0.2% 0.0% 1.0% 0.1% 67.7% 2.0%
Estimated gross carrying amount at default, £m 0.1 - - - 0.7
Lifetime expected credit loss, £m 0.8
The following table shows the movement in the lifetime expected credit losses;
there has been no change in the estimation techniques or significant
assumptions made during the current reporting period:
2024 2023
Loss allowance £m £m
At 1 April 0.8 0.5
Net remeasurement of loss allowance - 0.4
Amounts written off as uncollectable (0.4) (0.1)
At 31 March 0.4 0.8
13. Cash and cash equivalents
In the Group cash flow statement, net cash and cash equivalents are shown
after deducting bank overdrafts as follows:
2024 2023
£m £m
Cash and cash equivalents 17.8 19.3
Less: Overdrafts (Note 14) (3.7) (1.8)
Net cash and cash equivalents 14.1 17.5
14. Borrowings
2024 2023
£m £m
Current borrowings:
Overdrafts (Note 13) 3.7 1.8
Capitalised costs (0.3) -
Bank loans 0.4 45.5
Current borrowings 3.8 47.3
Non-current borrowings:
Bank loans 38.8 1.3
Capitalised costs (0.4) -
Non-current borrowings 38.4 1.3
Preference stock 0.5 0.5
38.9 1.8
Total borrowings 42.7 49.1
The above loans form part of the Renold plc Group core banking facilities. The
UK banking facility matures in May 2026, therefore is classed as non-current
borrowings.
All financial liabilities above are carried at amortised cost.
Core banking facilities
On 09 May 2023 the Group renewed its £85.0m Multi-Currency Revolving Facility
banking facilities with HSBC UK, Allied Irish Bank (GB), Citibank and
Santander. The facility matures in May 2026 (with an option to extend the term
for a further two years) and is fully committed and available until maturity.
At the year end, the undrawn core banking facility was £45.9m (2023:
£16.1m). The Group also benefits from a UK overdraft and a number of overseas
facilities totalling £5.0m (2023: £4.4m) with availability at year end of
£1.2m. The Group pays interest at SONIA (or LIBOR prior to 20 December 2021)
plus a variable margin in respect of the core banking facility. The average
rate of interest paid
14. Borrowings (continued)
in the year was SONIA (20 December 2021 onwards) or LIBOR (prior to 20
December 2021) plus 1.60% for Sterling, Euro and US Dollar denominated
facilities (2023: plus 1.85% for Sterling, Euro and US Dollar denominated
facilities).
The core banking facility is subject to two covenants, which are tested
semi-annually: net debt to EBITDA (leverage, maximum ratio 3.0 times) and
EBITDA to net finance charges (interest cover, minimum ratio 4.0 times).
Secured borrowings
Included in Group borrowings are secured borrowings of £42.9m (2023:
£48.6m). Security is provided by fixed and floating charges over assets
(including certain property, plant and equipment and inventory) primarily in
the UK, USA, Germany and Australia. Certain Group companies have provided
cross-guarantees in respect of these borrowings
Preference stock
At 31 March 2024, there were 580,482 units of preference stock in issue (2023:
580,482).
All payments of dividends on the preference stock have been paid on the due
dates. The preference stock has the following rights:
i. a fixed cumulative preferential dividend at the rate of 6% per annum
payable half yearly on 1 January and 1 July in each year;
ii. rank both with regard to dividend (including any arrears on the
commencement of a winding up) and return of capital in priority to all other
stock or shares in the Company, but with no further right to participate in
profits or assets;
iii. no right to attend or vote, either in person or by proxy, at any general
meeting of the Company or to have notice of any such meeting, unless the
dividend on the preference stock is in arrears for six calendar months; and
iv. no redemption entitlement and no fixed repayment date.
There is no significant difference between the carrying value of financial
liabilities and their equivalent fair value.
15. Trade and other payables
2024 2023
Current Non-current Current Non-current
£m £m £m £m
Trade payables(1) 16.2 - 22.1 -
Other taxation and social security(1) 3.3 - 2.5 -
Other payables(1) 7.9 - 8.9 2.5
Contract liabilities - - 0.3 -
Accruals(1) 26.3 - 23.4 -
53.7 - 57.2 2.5
(1) Financial liabilities carried at amortised cost.
Trade payables are non-interest bearing and are normally settled within 60-day
terms. The Group does have a concentration of translational foreign exchange
risk in both US Dollars and Euros; however, the Group hedges against this
risk. Non-current other payables relate to the deferred element of the
construction costs for the Chinese factory in Jintan.
The Group did not operate supplier financing or reverse factoring programmes
during the current or prior financial year.
The Directors consider that the carrying amount of trade payables approximates
to their fair value.
Contract liabilities relate to consideration received in advance of the
completion of the associated performance obligation. Revenue recognised in the
reporting period that was included in the contract liability at beginning of
the year totalled £0.3m (2023: £nil).
16. Provisions
Business Restructuring Environmental and Other Provisions Total provisions
Dilapidations
£m £m £m £m
At 1 April 2023 0.8 3.0 1.2 5.0
Arising during the year 0.1 0.2 2.0 2.3
Utilised in the year (0.1) - - (0.1)
Acquired/(disposed) - (0.5) (0.1) (0.6)
Charged/(released) during the year 0.1 - (0.1) -
At 31 March 2024 0.9 2.7 3.0 6.6
2024 2023
Allocated as: £m £m
Current provisions 1.6 0.9
Non-current provisions 5.0 4.1
6.6 5.0
Business restructuring
During the year ended 31 March 2024, a provision was recognised for legal and
redundancy costs in relation to the reduction of headcount within a number of
the Groups locations, especially within mainland Europe. Despite a number of
the legal processes involved with this restructuring being lengthy, it is
anticipated that the provision will be utilised within the next 12 months
(£0.9m).
Environmental and Other provisions
During the year ended 31 March 2024, a provision was recognised for
Environmental costs in relation to a number of the Group's closed sites,
including sites within both the UK and France. It is anticipated that the
provision recorded will be utilised over a number of future years, accordingly
the majority of the provision is recorded as non-current (£2.3m).
During the year ended 31 March 2024, a provision was recognised for
anticipated costs relating to customer claim concerning products supplied by
the Group. It is anticipated that the provision will be utilised within the
next 12 months (£0.7m). The claims could result in a range of outcomes from
£0.3m to £1.4m.
Dilapidations
Provisions are recognised in relation to contractual obligations to reinstate
leasehold properties to the state of repair specified in the property lease.
The provision includes costs, as required within the lease, to rectify or
reinstate modifications to the property and to remediate general wear and tear
incurred to the balance sheet date. The provision to rectify or reinstate
modifications is recognised on inception, with a corresponding fixed asset
that is depreciated in line with the underlying asset. The provision to
rectify general wear and tear is recognised as it is incurred over the life of
the lease.
The provision is assessed based on the expected cost at the balance sheet
date, using recent cost estimates from suitably qualified property
professionals. These estimates are adjusted to reflect the impact of inflation
between the date of assessment and the expected timing of the payments, and
are then discounted back to present value. A range of inflation and discount
rates have been used in order to best reflect the circumstances of the lease
to which the dilapidation obligation relates. The inflation rate applied
ranges from 2.9% to 4.5% and the discount rate ranges from 1.6% to 9.8%. These
rates are most notably impacted by the country of lease and length of lease.
The majority of the dilapidation provision relates to cash outflows which are
expected to take place at the end of each respective lease term; none of which
are expected to end within the next 12 months. The associated outflows are
estimated to arise over a period of up to 21 years from the balance sheet
date. As a result substantially all of the provision is classed as non-current
(£2.7m).
17. Additional cash flow information
Reconciliation of operating profit to net cash flows from operations:
2024 2023
£m £m
Cash generated from operations:
Operating profit from continuing operations 30.5 22.9
Depreciation of property, plant and equipment - owned assets 6.1 6.1
Depreciation of property, plant and equipment - right-of-use assets 2.6 2.5
Amortisation of intangible assets 2.1 2.5
Loss on disposals of plant and equipment - 0.3
Profit on disposals of right-of-use assets (2.4) -
Share-based payments 1.4 1.3
Increase in inventories - (4.5)
Decrease/(increase) in receivables 2.9 (2.8)
Decrease in payables (2.7) (4.2)
Increase in provisions 1.5 1.0
Cash contribution to pension schemes (6.0) (5.8)
Pension current service cost (non-cash) - 0.1
Cash generated from operations 36.0 19.4
Reconciliation of net change in cash and cash equivalents to movement in net
debt:
2024 2023
£m £m
(Decrease)/increase in cash and cash equivalents (Consolidated Statement of (2.7) 7.9
Cash Flows)
Change in net debt resulting from cash flows
- Proceeds from borrowings (58.8) (28.3)
- Repayment of borrowings 67.4 8.3
Foreign currency translation differences (0.7) (0.7)
Non-cash movement on capitalised finance costs (0.3) (0.3)
Net debt acquired as part of the business combination - (2.9)
Change in net debt during the period 4.9 (16.0)
Net debt at start of year (29.8) (13.8)
Net debt at end of year (24.9) (29.8)
Net debt comprises:
Cash and cash equivalents (Note 13) 17.8 19.3
Total borrowings (Note 14) (42.7) (49.1)
(24.9) (29.8)
17. Additional cash flow information (continued)
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Assets and
liabilities arising from financing activities are those for which cash flows
were, or future cash flows will be, classified in the Group's consolidated
cash flow statement as cash flows from financing activities.
Opening balance Accrued interest Financing cash flows New leases Lease disposal Net debt acquired Other non-cash changes(1) Closing balance
2024 £m £m £m £m £m £m £m £m
Bank loans (Note 14) 46.8 3.7 (10.8) - - - (0.5) 39.2
Capitalised costs (Note 14) - - (1.0) - - - 0.3 (0.7)
Preference stock (Note 14) 0.5 - - - - - - 0.5
Lease liabilities (Note 10) 20.2 0.8 (3.3) 3.1 (5.2) - (0.5) 15.1
Total liabilities from financing activities 67.5 4.5 (15.1) 3.1 (5.2) - (0.7) 54.1
Overdrafts (Note 14) 1.8 3.7
Less: Lease liabilities (Note 10) (20.2) (15.1)
Total borrowings (Note 14) 49.1 42.7
Add: Cash and cash equivalents (Note 13) (19.3) (17.8)
Net debt 29.8 24.9
(1) Non-cash changes include the amortisation of capitalised finance costs and
foreign exchange translation.
Opening balance Accrued interest Financing cash flows New leases Lease disposal Net debt acquired Other non-cash changes(1) Closing balance
2023 £m £m £m £m £m £m £m £m
Bank loans (Note 14) 22.8 2.3 17.7 - - 2.9 1.1 46.8
Capitalised costs (Note 14) - - - - - - - -
Preference stock (Note 14) 0.5 - - - - - - 0.5
Lease liabilities (Note 10) 12.0 0.8 (3.6) 11.0 - - - 20.2
Total liabilities from financing activities 35.3 3.1 14.1 11.0 - 2.9 1.1 67.5
Overdrafts (Note 14) 1.0 1.8
Less: Lease liabilities (Note 10) (12.0) (20.2)
Total borrowings (Note 14) 24.3 49.1
Add: Cash and cash equivalents (Note 13) (10.5) (19.3)
Net debt 13.8 29.8
(1) Non-cash changes includes the amortisation of capitalised finance costs
and foreign exchange translation.
18. Business combinations
During the year the Group completed the acquisition of the trading assets of
Davidson Chain PTY ("Davidson") for the total consideration of AU$6.0m
(£3.1m), of which AU$5.7m (£3.0m) was paid on the date of the acquisition
with the remaining AU$0.3m (£0.1m) being deferred, to be paid in September
2024. Davidson is based in Melbourne, Australia, and is a manufacturer and
distributor of high quality conveyor chain ("CVC").
The transaction has been accounted for as a business combination under IFRS 3
and is summarised below:
Recognised values on acquisition
£m
Fair value of net assets acquired:
Intangible assets 1.1
Property, plant and equipment 0.1
Inventories 0.5
Trade and other receivables 0.3
Trade and other payables (0.4)
Deferred tax liabilities (0.3)
Net identifiable assets and liabilities 1.3
Goodwill 1.8
Total consideration 3.1
Consideration:
Cash consideration 3.0
Deferred consideration 0.1
Total consideration transferred/to be transferred 3.1
Net cash outflow arising on acquisition:
Cash consideration paid (3.0)
Add: cash and cash equivalents acquired -
(3.0)
Increase in net debt arising on acquisition:
Net cash outflow arising on acquisition (3.0)
Less: Acquisition costs (0.5)
(3.5)
Acquisition related costs amounted to £0.5m and have been included in the
Income Statement.
The gross contractual value of the trade and other receivables was £0.3m. The
best estimate at the acquisition date of the contractual cash flows not
expected to be collected was £nil.
Deferred consideration of £0.1m is payable within one year.
The goodwill arising on acquisition has been allocated to the Australia CGU
and is expected to be deductible for tax purposes. The goodwill is
attributable to:
• the anticipated profitability of the distribution of the Group's
services in new markets; and
• the synergies that can be achieved in the business combination
including management, processes and maximising site capacities.
The business was acquired on 1 September 2023 and contributed £0.9m revenue
and £0.2m adjusted operating profit for the period between the date of
acquisition and the balance sheet date.
If the acquisition had been completed on the first day of the financial
period, the acquisition would have contributed £1.6m to Group revenue, £0.0m
to Group operating profit and £0.4m adjusted operating profit (after adding
back £0.2m acquisition costs and £0.2m amortisation of acquired
intangibles).
18. Business combinations (continued)
During the year deferred consideration of €2.0m (£1.7m) was also paid in
relation to the acquisition of the conveyor chain business of Industrias YUK
S.A. in the prior year.
Total net cash outflow arising on acquisitions:
Davidson Chain PTY (3.0)
Industrias YUK S.A. (1.7)
(4.7)
Total increase in net debt arising on acquisitions:
Davidson Chain PTY (3.5)
Industrias YUK S.A. (1.7)
(5.2)
19. Alternative performance measures
In order to provide users of the accounts with a clear and consistent
presentation of the performance of the Group's ongoing trading activity, the
Group uses various alternative performance measures (APMs), including the
presentation of the income statement in a three-column format with 'Adjusted'
measures shown separately from statutory items. Amortisation of acquired
intangibles, restructuring costs, discontinued operations and material one-off
items or remeasurements are included in a separate column as management seek
to present a measure of performance which is not impacted by material
non-recurring items or items considered non-operational. Performance measures
for the Group's ongoing trading activity are described as 'Adjusted' and are
used to measure and monitor performance as management believe these measures
enable users of the financial statements to better assess the trading
performance of the business. In addition, the Group reports sales and profit
measures at constant exchange rates. Constant exchange rate metrics exclude
the impact of foreign exchange translation, by retranslating the comparative
to current year exchange rates.
The APMs used by the Group include:
APM Reference Explanation of APM
• adjusted operating profit A Adjusted measures are used by the Group as a measure of underlying business
performance, adding back items that do not relate to underlying performance
• adjusted profit before taxation B
• adjusted EPS C
• return on sales D
• operating profit gearing D
• revenue at constant exchange rates E Constant exchange rate metrics adjusted for constant foreign exchange
translation and are used by the Group to better understand year on year
changes in performance
• adjusted operating profit at constant exchange rates F
• adjusted return on sales at constant exchange rates G
• EBITDA H EBITDA is a widely utilised measure of profitability, adjusting to remove
non-cash depreciation and amortisation charges
H
• adjusted EBITDA H
• operating cash flow H
• net debt I Net debt, leverage and gearing are used to assess the level of borrowings
within the Group and are widely used in capital markets analysis
• leverage ratio J
• gearing ratio K
• legacy pension cash costs L The cost of legacy pensions is used by the Group as a measure of the cash cost
of servicing legacy pension schemes
• average working capital ratio M Working capital as a ratio of rolling 12-month revenue is used to measure cash
performance and balance sheet strength
19. Alternative performance measures (continued)
APMs are defined and reconciled to the IFRS statutory measure as follows:
(A) Adjusted operating profit
Year ended 31 March 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 32.8 8.4 (10.7) 30.5
Add back/(deduct):
Amortisation of acquired intangible assets 1.0 - - 1.0
Acquisition costs - - 0.5 0.5
Assignment of lease and cost of closed sites (2.3) - - (2.3)
Adjusted operating profit 31.5 8.4 (10.2) 29.7
Year ended 31 March 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 26.5 5.4 (9.0) 22.9
Add back/(deduct):
Amortisation of acquired intangible assets 0.7 - - 0.7
Acquisition costs - - 0.6 0.6
Adjusted operating profit 27.2 5.4 (8.4) 24.2
(B) Adjusted profit before taxation
2024 2023
£m £m
Profit before taxation 22.9 17.3
Add back/(deduct):
Amortisation of acquired intangible assets 1.0 0.7
Acquisition costs 0.5 0.6
Assignment of lease and cost of closed sites (2.3) -
Adjusted profit before taxation 22.1 18.6
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 5.
(D) Return on sales and operating profit gearing
Year ended 31 March 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Adjusted operating profit 31.5 8.4 (10.2) 29.7
Total revenue (including inter-segment sales) 192.8 53.5 (4.9) 241.4
Return on sales % 16.3% 15.7% - 12.3%
Year ended 31 March 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Adjusted operating profit 27.2 5.4 (8.4) 24.2
Total revenue (including inter-segment sales) 202.4 48.8 (4.1) 247.1
Return on sales % 13.4% 11.1% - 9.8%
19. Alternative performance measures (continued) Year ended 31 March 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Adjusted operating profit - 2024 31.5 8.4 (10.2) 29.7
Adjusted operating profit - 2023 27.2 5.4 (8.4) 24.2
Year on year change in adjusted operating profit (a) 4.3 3.0 (1.8) 5.5
Total revenue (including inter-segment sales) - 2024 192.8 53.5 (4.9) 241.4
Total revenue (including inter-segment sales) - 2023 202.4 48.8 (4.1) 247.1
Year on year change in total revenue (b) (9.6) 4.7 (0.8) (5.7)
Adjusted operating profit gearing % ((a)/(b)) -45% 64% n/a -96%
Year ended 31 March 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Adjusted operating profit - 2023 27.2 5.4 (8.4) 24.2
Adjusted operating profit - 2022 18.9 4.1 (7.7) 15.3
Year on year change in adjusted operating profit (a) 8.3 1.3 (0.7) 8.9
Total revenue (including inter-segment sales) - 2023 202.4 48.8 (4.1) 247.1
Total revenue (including inter-segment sales) - 2022 159.2 40.4 (4.4) 195.2
Year on year change in total revenue (b) 43.2 8.4 0.3 51.9
Adjusted operating profit gearing % ((a)/(b)) 19% 15% n/a 17%
(E), (F) & (G) Revenue, adjusted operating profit and adjusted operating
profit margin at constant exchange rates
Year ended 31 March 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
External customer - transferred at a point in time 191.9 45.3 - 237.2
External customer - transferred over time - 4.2 - 4.2
Inter-segment 0.9 4.0 (4.9) -
Foreign exchange retranslation 6.3 1.7 (0.1) 7.9
Revenue at constant exchange rates 199.1 55.2 (5.0) 249.3
Adjusted operating profit 31.5 8.4 (10.2) 29.7
Foreign exchange retranslation 0.9 0.3 (0.1) 1.1
Adjusted operating profit at constant exchange rates 32.4 8.7 (10.3) 30.8
Return on sales at constant exchange rates % 16.3% 15.8% - 12.4%
19. Alternative performance measures (continued)
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation
and amortisation) and operating cash flow
2024 2023
£m £m
Statutory operating profit from continuing operations 30.5 22.9
Depreciation and amortisation 10.8 11.1
Share-based payments 1.4 1.3
EBITDA(1) 42.7 35.3
Add back/(deduct):
Loss on disposals of plant & equipment - 0.3
Acquisition Costs 0.5 0.6
Assignment of lease and cost of closed sites (2.3) -
Adjusted EBITDA(1) 40.9 36.2
Inventories (Note 11) - (4.5)
Trade and other receivables (Note 12) 2.9 (2.8)
Trade and other payables (Note 15) (2.7) (4.2)
Provisions (Note 16) 1.5 1.0
Movement in working capital 1.7 (10.5)
Purchase of property, plant and equipment (Consolidated Statement of Cash (8.3) (7.0)
Flows)
Purchase of intangible assets (Consolidated Statement of Cash Flows) (1.3) (1.4)
Proceeds from property disposals 0.1 -
Cash outflow on disposal of right-of-use assets (0.6) -
Net capital expenditure (10.1) (8.4)
Operating cash flow 32.5 17.3
(1) The calculation of EBITDA, adjusted EBITDA and operating cash flow
deliberately excludes an add back for the non-cash share-based payment charge
of £1.4m for the year (2023: £1.3m). This is done in order to ensure
consistency with the metrics used to assess performance against the annual
bonus plan targets.
(I) Net debt
Net debt is reconciled to the statutory balance sheet in Note 17.
(J) Leverage ratio
2024 2023
£m £m
Net debt (Note 17) 24.9 29.8
Adjusted EBITDA 40.9 36.2
Leverage ratio 0.6 times 0.8 times
(K) Gearing ratio
2024
2023
£m £m £m £m
Net debt (Note 17) 24.9 29.8
Equity attributable to equity holders of the parent 50.2 39.1
Net debt (Note 17) 24.9 29.8
Total capital plus net debt 75.1 68.9
Gearing ratio % 33% 43%
(L) Legacy pension cash costs
2024 2023
£m £m
Cash contributions to pension schemes 5.5 4.6
Pension payments in respect of unfunded schemes 1.1 1.2
Scheme administration costs 0.5 0.7
7.1 6.5
19. Alternative performance measures (continued)
(M) Average working capital ratio
2024 2023
£m £m
Inventories 60.6 61.8
Trade and other receivables 39.8 43.5
Trade and other payables (53.7) (57.2)
Total working capital 46.7 48.1
Average working capital(1) (a) 47.4 41.9
Revenue (b) 241.4 247.1
Average working capital ratio ((a)/(b)) 20% 17%
(1) Calculated as a simple average of the opening and closing balance sheet
working capital.
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